U.S. employment growth
slowed more than expected in December amid job losses in the
construction, retail and manufacturing sectors, but a decline in
the unemployment rate to 4.4% suggested the labor market was not
rapidly deteriorating.
The Labor Department’s closely watched employment report on
Friday also showed solid wage growth last month, bolstering
economists’ expectations the Federal Reserve would leave
interest rates unchanged at its January 27-28 meeting.
Economists have blamed sluggish job growth on President Donald
Trump’s aggressive trade and immigration policies, which they
say have reduced both demand for and supply of workers.
Businesses are also holding back on hiring, unsure of their
staffing needs as they invest heavily in artificial
intelligence. The economy is experiencing a jobless expansion,
with growth and worker productivity surging in the third
quarter, which was partly attributed to AI.
“All roads lead to the unemployment rate … it should douse
the Fed’s recent urgency to backstop a weakening labor market,”
said Olu Sonola, head of U.S. economic research at Fitch
Ratings. “That said, the weak job-growth story can’t be brushed
aside. Hiring is still stuck in stall speed, and job growth in
the cyclical parts of the economy isn’t sending a comforting
signal.”
Nonfarm payrolls increased by 50,000 jobs last month after a
downwardly revised rise of 56,000 in November, the Labor
Department’s Bureau of Labor Statistics said. Economists polled
by Reuters had forecast a gain of 60,000 jobs after a previously
reported increase of 64,000 in November.
The labor market lost considerable momentum last year, with
only 584,000 jobs added, averaging 49,000 positions per month.
Roughly 2 million jobs were created in 2024, though this number
could be revised lower when the BLS publishes its payrolls
benchmark revision next month with the January employment
report.
The BLS has estimated about 911,000 fewer jobs were created in
the 12 months through March 2025 than previously reported.
The overcounting has been blamed on the birth-death model,
which is used by the BLS to estimate how many jobs were gained
or lost because of companies opening or closing in a given
month. The BLS said last month that it would, starting in
January, change the birth-death model it uses by incorporating
current sample information each month.
DECEMBER JOB GROWTH LIMITED TO HANDFUL OF INDUSTRIES
Job gains last month were confined to a few industries, with
employment at restaurants and bars increasing by 27,000
positions. Healthcare industry payrolls rose by 21,000, with
most of the gains occurring at hospitals. The increase was well
below the average monthly gain of 34,000 jobs in 2025 and 56,000
in 2024. The social assistance sector added 17,000 jobs last
month.
The retail industry shed 25,000 jobs, while manufacturing
lost another 8,000 positions. Economists have attributed factory
job losses to the Trump administration’s tariff increases. Trump
has ironically defended the import duties as necessary to revive
the manufacturing industry. Construction payrolls decreased by
11,000 in December.
Wages increased 3.8% on a year-over-year basis after rising
3.6% in November, helping to underpin the economy through
consumer spending.
U.S. stocks were trading largely flat. The dollar rose
against a basket of currencies. U.S. Treasury yields were mixed.
Together with the December employment report, the BLS
published annual revisions to the household survey data for the
past five years. The unemployment rate is calculated from the
household survey.
The annual population control adjustments, normally
incorporated with the January employment report, will be
released in March. The unemployment rate for November was
revised down to 4.5% from the previously reported 4.6%.
Economists had expected the jobless rate to ease to 4.5% in
December.
Some economists say low supply has prevented a sharp rise in
the unemployment rate. They estimated that between 50,000 and
120,000 jobs need to be created each month to keep up with
growth in the working-age population.
The Fed cut its benchmark interest rate by a quarter of a
percentage point to the 3.50%-3.75% range in December, but U.S.
central bank officials indicated they were likely to pause
further reductions in borrowing costs for now to get a better
sense of the economy’s direction.
With factors like tariffs and AI preventing companies from
hiring more workers, economists increasingly view the labor
market’s challenges as more structural than cyclical, which
would make rate cuts less effective to stimulate job growth.
Published on January 9, 2026
