America’s employment situation showed some signs of stabilization in December, but U.S. job creation still fell well short of estimates for the month, and figures from the prior two months were severely cut back.
The Labor Department reported Friday that nonfarm payrolls grew by 50,000 in December—sharply below Dow Jones-polled economists’ expectations for 73,000 jobs created. That tally was lower than November’s revised total of 56,000, itself down by 8,000 jobs from the initial print last month. October’s already-dour reading of 105,000 jobs lost was brought down even further, to a decline of 173,000.
December’s jobs tally cemented 2025 the worst job market in decades (outside of official recessions).
“The labor market has shown continued resiliency, but it’s still softening, and the pace of overall employment gains has slowed to the dragging pace of growth we saw in 2020,” says Jerry Tempelman, VP of Fixed Income Research at Mutual of America Capital Management.
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Unemployment managed to decline, however, coming in at 4.4% versus 4.6% in November. That was also better than expectations for a slight dip to 4.5% to close out the year, but still below the 4.0%-4.2% range the nation had maintained for most of 2025.
December’s hourly earnings figure, meanwhile, came in right alongside forecasts. Growth of 0.3% month-over-month, to $37.02, was better than November’s meager 0.1% MoM improvement. And over the past year, average hourly earnings have grown by 3.8%.
Here’s a brief look at the December jobs report’s most pertinent details:
- December payrolls: +50,000 MoM (estimate: +73,000)
- December unemployment: 4.4% (estimate: 4.5%)
- December hourly earnings: +0.3% MoM (estimate: +0.3%)
- November payrolls (revised): +56,000 (+64,000 previously)
- October payrolls (revised): -173,000 (-105,000 previously)
“The December jobs release provided the first clean read on the labor market since the government shutdown ended but did little to provide clarity about the state of the labor market given its mixed reading,” says Jeff Schulze, Head of Economic and Market Strategy at ClearBridge Investments. “On the positive side, the unemployment rate dropped to 4.4%, a positive given its rise had been a key concern and marker of labor weakness over the past year. On the negative side, revisions revealed fewer jobs created than previously believed with private payrolls bearing the brunt of the downgrade.”
The greatest job gains were seen in food services and drinking places, adding 27,000 positions in December. That was well above the average of 12,000 jobs created across 2025. Health care remained a source of strength, gaining 21,000 jobs, though that was a far cry from 2025’s monthly average of 34,000 additions.
Meanwhile, retail lost 25,000 jobs in December, with the biggest hits felt in warehouse clubs, supercenters, and other general merchandise retailers. And while federal government employment actually improved by 2,000 jobs, the sector shed 277,000 jobs (or 9.2%) since peaking in January.
For the full year, the only industries that added jobs in the aggregate were health care and leisure/hospitality.
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Expectations for a Fed Rate Cut Spike
Wall Street also became even more convinced that the Federal Reserve would end its streak of interest-rate cuts at three, electing to keep its target range in place at the next Federal Open Market Committee (FOMC) meeting, set for Jan. 27-28.
The CME FedWatch Tool, which uses Fed funds futures prices to track the probability of a change to the federal funds rate, now shows a 97% chance that the central bank will keep its benchmark rate at 3.50%-3.75%. That’s a jump from the 89% chance indicated yesterday, 83% last week, and 70% a month ago.
“Goodbye, January!” says Lindsay Rosner, head of multi sector fixed income investing at Goldman Sachs Asset Management. “The Fed will likely hold course for now with the labor market showing tentative signs of stabilizing. The unemployment rate improved, suggesting November’s jump was down to one-off DOGE-deferred resignations and data distortions rather than a sign of systemic weakness.
“We expect the Fed to remain on hold for now, but still pencil in two cuts for the rest of 2026.”
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More Expert Reactions to December’s Jobs Report
Here’s what other strategists, financial managers, and experts had to say about last month’s employment situation:
Steve Rick, Chief Economist, TruStage
“Weekly jobless claims have remained within a relatively narrow range in recent months, indicating that businesses are prioritizing retention even as growth slows and cost pressures persist. Taken together, the data support a picture of moderately below-trend economic growth rather than an imminent recession. Labor demand is shrinking unevenly across sectors, particularly with the most change among small and mid-sized employers which tend to be the first to struggle as they navigate tighter financial conditions.
“For markets, softer employment data add to an already cautious tone heading into the new year. After a weak ‘Santa Claus rally,’ investors are banking on early-January indicators for clarity on the economic and earnings outlook, meaning we could see greater sensitivity to less-than-stellar labor data.”
Lara Castleton, US Head of Portfolio Construction and Strategy, Janus Henderson Investors
“On the surface, this paints a picture of continued labor market resilience, with wages keeping pace with inflation, something market bulls will welcome. Underlying sector dynamics will be important to consider going forward. More sectors are starting to slow alongside manufacturing, while healthcare continues to show strength. Risk-on sentiment remains intact for now in portfolios, but the data effectively removes any chance of a January Fed rate cut. Investors should prepare for a status quo on rates, emphasizing spread and yield carry while focusing on fundamental sector opportunities.”
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Jason Pride, Chief of Investment Strategy and Research, Glenmede
“Today’s employment report shows a labor market that’s holding up reasonably well, even if job growth did not appear particularly robust. The unemployment rate ticked lower to 4.4%, confirming that the pop higher in November was largely a function of statistical noise around the government shutdown. However, nonfarm payrolls continued at their tepid pace, growing +50k in December with -76k revisions to prior months. This fits into the broader narrative that the labor market is finding a tenuous equilibrium marked by light hiring and firing in parallel.
“This report likely does not change expectations all that much for the Fed’s meeting later this month, as a rate cut pause is the most likely outcome. A “good enough” jobs report likely allows them to take a patient approach to further rate adjustments and gather more data to better assess their next move. The Fed’s path in 2026 remains highly data dependent, though a good base for now may be 1-2 rate cuts by year-end, more likely under the tutelage of a new, more dovish, Fed chair.”
Steve Wyett, Chief Investment Strategist, BOK Financial
“The good news in this is if there was a fear of this number showing a weakening labor market and putting growth expectations for 2026 risk, that is not what we are seeing. The Fed should look at this number as confirmation of past actions but affirm their outlook for a reduced need for rate cuts going forward. We remain in a low-fire, low-hire environment for now.”
Scott Helfstein, Head of Investment Strategy, Global X
“The potential Supreme Court ruling on tariffs will likely overshadow the slightly disappointing or largely irrelevant year-end jobs report. A reversal of tariffs might unleash some pent-up investment outside of AI spending as companies get more clarity about cost structure and supply chains. With the pending Supreme Court ruling, keep in mind that tariffs have not really been that meaningful relative to GDP or triggered a sharp rise in prices. That said, there seems to be a negative impact on investment and sentiment that could be holding back potential growth.
“The slowdown in logistics services like warehousing and transportation is notable. This may be driven by secular shifts in automation technology like AI or could be signaling a slowdown in economic activity. This is worth watching more closely.”
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