Summary of December US Jobs Report
The December US employment report has revealed a significant slowdown in hiring, confirming trends observed throughout 2025. According to data from the Bureau of Labor Statistics, nonfarm payrolls increased by only 50,000 in December, falling short of market expectations of 70,000. Despite this, the unemployment rate saw a slight decrease to 4.4%.
Uneven Hiring Across Sectors
Job growth was primarily concentrated in the leisure and hospitality sectors, as well as healthcare, which accounted for most of the new jobs created in December and throughout the year. Conversely, five out of eleven major sectors, including retail trade, construction, and manufacturing, experienced declines in employment. Private-sector employers added a mere 37,000 jobs, a stark contrast to the gains seen in the same period the previous year.
Data Revisions and Annual Performance
Revisions to payroll figures for October and November indicated a downward adjustment of 76,000 jobs, further painting a bleak picture of labor market momentum. For the entirety of 2025, employment rose by only 584,000, marking the weakest year for job creation since 2020, when the pandemic severely impacted the labor market.
Labor Force Participation and Long-Term Unemployment
The labor force participation rate decreased to 62.4%, while the proportion of prime-age workers (aged 25 to 54) remained stable. Notably, the number of long-term unemployed individuals, defined as those out of work for 27 weeks or more, surged by nearly 400,000 in 2025, representing the largest annual increase since the pandemic. Additionally, there was a significant rise in the number of people working part-time for economic reasons, indicating growing uncertainty among workers.
Market Reaction and Federal Reserve's Stance
In response to the cooling labor market, the Federal Reserve implemented three interest rate cuts towards the end of 2025. However, following the December jobs report, investors began to retract their expectations for further rate cuts, leading to a rise in Treasury yields. Current market sentiment suggests that the Fed may maintain rates at its upcoming January meeting.
Wages and Consumer Sentiment
Average hourly earnings increased by 0.3% month-over-month in December, aligning with expectations. Although wage growth has been decelerating, it remains a crucial factor driving consumer spending, which is increasingly concentrated among wealthier households. Despite some signs of improvement, consumer confidence remains low, hovering near record lows.
Cautious Outlook for the Year Ahead
Economists predict that the labor market will continue to exhibit weakness in the coming months, with limited job opportunities and further cooling in wage growth. This situation may exacerbate household concerns regarding affordability and financial security, particularly in light of the upcoming congressional elections. As a result, the US labor market enters the new year in a precarious state, characterized by a lack of clear momentum for recovery.