December US Jobs Report Shows Weaker Hiring

[Ben Graham]

The December US employment report confirmed a clear slowdown in hiring that had been visible throughout the past year. Data published by the Bureau of Labor Statistics show that nonfarm payrolls increased by just 50,000 in December, well below market expectations of 70,000. At the same time, the unemployment rate edged down slightly to 4.4%.

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NonFarm Payrolls monthly change (in thousands), source: Bloomberg

While the decline in unemployment may suggest stability in the labor market, the details of the report point to a more complex picture.

Uneven Hiring Across Sectors

Job growth was concentrated mainly in leisure and hospitality as well as health care. These industries accounted for the majority of new jobs both in December and throughout 2025. At the same time, five of the eleven major sectors of the economy recorded declines in employment, including retail trade, construction, and manufacturing.

Private-sector employers added only 37,000 jobs, a fraction of the gains seen in the same period a year earlier.

Data Revisions and a Weak Annual Balance

In addition, payroll figures for October and November were revised down by a combined 76,000 jobs, further weakening the picture of labor market momentum. For the full year 2025, employment rose by just 584,000, making it the weakest year for job creation since 2020, when the Covid-19 pandemic triggered a sharp collapse in the labor market.

Labor Force Participation and Long-Term Unemployment

The labor force participation rate slipped to 62.4%, while the share of workers aged 25 to 54 — known as prime-age workers — remained steady. Meanwhile, the number of long-term unemployed people, defined as those out of work for 27 weeks or more, rose by nearly 400,000 in 2025, the largest annual increase since the pandemic.

The number of people working part time for economic reasons also increased sharply, highlighting growing uncertainty among workers.

Market Reaction and the Federal Reserve’s Stance

As the labor market gradually cooled, the Federal Reserve cut interest rates three times toward the end of 2025. Following the release of the December report, however, investors began unwinding bets on further rate cuts. Treasury yields rose, and markets now expect the Fed to keep rates unchanged at its January meeting.

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Conditional Meeting Probabilities, source: CME FedWatch Tool

According to Bloomberg economists, the latest jobs data may have raised concerns among policymakers, but not enough to justify a swift return to rate cuts.

Wages and Consumer Sentiment

Average hourly earnings rose by 0.3% month over month in December, in line with expectations. Although wage growth has been slowing, it remains a key driver of consumer spending, which has become increasingly concentrated among wealthier households.

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United States Average Hourly Earnings (monthly), source: TradingEconomics

Despite some recent signs of improvement, consumer confidence remains subdued and close to record lows.

Cautious Outlook for the Year Ahead

Economists expect the labor market to remain weak in the coming months, with limited job opportunities and further cooling in wage growth. This outlook could intensify household concerns about affordability and financial security, particularly ahead of upcoming congressional elections. As a result, the US labor market enters the new year in a fragile balance — without a sharp rise in unemployment, but also without clear momentum for a rebound.

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