December hiring misses expectations
The US labor market closed 2025 with weaker-than-expected momentum, as job creation slowed sharply in December, according to data released Friday by the Bureau of Labor Statistics.
Nonfarm payrolls increased by a seasonally adjusted 50,000 jobs during the month, below the downwardly revised 56,000 added in November and well short of the 73,000 expected by economists surveyed by Dow Jones.
Despite slower hiring, the unemployment rate edged down to 4.4%, compared with forecasts of 4.5%. A broader measure of unemployment that includes discouraged workers and those working part time for economic reasons declined to 8.4%, down 0.3 percentage point from November.
Mixed signals across labor indicators
The report painted a mixed picture of the labor market. While payroll growth remained subdued, the household survey showed employment rising by 232,000. At the same time, the labor force participation rate slipped slightly to 62.4%.
Revisions to prior months further highlighted the slowdown. November payroll growth was revised down by 8,000 jobs, while October losses were deepened to 173,000 from an earlier estimate of 105,000.
For the full year, average monthly job gains stood at just 49,000, a sharp decline from the 168,000 monthly average recorded in 2024.
Sector performance and wage trends
Restaurants and bars led job creation in December, adding 27,000 positions. Health care employment rose by 21,000, while social assistance added 17,000 jobs. Retail trade saw a decline of 25,000 positions, and government payrolls increased by just 2,000.
Average hourly earnings increased 0.3% for the month, in line with expectations. On an annual basis, wages rose 3.8%, slightly above forecasts. The average workweek edged down to 34.2 hours.
Implications for the Fed and markets
Markets reacted calmly to the data, with stock futures rising modestly and Treasury yields holding steady. Federal Reserve officials continue to closely monitor labor conditions as they assess the future path of interest rates.
According to Navy Federal Credit Union chief economist Heather Long, total payroll growth of 584,000 in 2025 marked the weakest year outside of a recession since 2003. She described the period as a “hiring recession,” noting that economic growth remained strong even as hiring lagged.
Despite calls for further rate cuts, broader economic indicators remain resilient. The Atlanta Fed estimates fourth-quarter GDP growth at a 5.4% annualized pace, following a strong third quarter. Consumer spending also surged during the holiday season, with online sales hitting record levels.
Markets currently expect the Federal Reserve to keep rates unchanged for several months, with the next potential cut not anticipated until June.
