By Andrew Moran
U.S. payrolls climbed less than expected in December, while the unemployment rate came in below market estimates, signaling a U.S. labor market holding steady to finish 2025.
The economy added 50,000 new jobs last month, down from 56,000 payroll gains in November, according to the Bureau of Labor Statistics on Jan. 9.
The unemployment rate fell to 4.4 percent, from 4.5 percent in the previous month.
FactSet Insights said economists had a median forecast of 55,000 and a jobless rate of 4.5 percent.
Recent job reports were subjected to revisions.
November’s job gains were revised lower from 64,000. The October numbers were also substantially adjusted lower, showing the economy lost 173,000 jobs instead of the initial estimate of 105,000.
The jobless rate was adjusted down from 4.6 percent.
For the full year, the bureau said the economy added 584,000 jobs, averaging 49,000 per month, compared to 168,000 in 2024.
“At first glance, this is a really positive report,” Chris Zaccarelli, chief investment officer at Northlight Asset Management, said in a note emailed to The Epoch Times.
“However, it will be easy for the skeptics to point out a very meager increase of 50k in jobs.”
The December figures validate the oft-described “low fire, low hire” environment as job creation remains anemic, and companies have refrained from terminating staff.
“There aren’t any red flashing lights indicating an imminent recession, but there are plenty of yellow warning lights flashing and there is the risk that we could approach stall speed,” he added.
Employment in food services and drinking places accounted for more than half of last month’s jobs, up by 27,000. This was followed by health care (21,000) and social assistance (17,000).
The retail sector lost 25,000 as the industry “showed little net change in both 2024 and 2025,” the bureau said.
Federal government payrolls ticked up 2,000, but declined by 277,000 last year after reaching a peak in January.
Average hourly earnings picked up momentum in the home stretch of 2025, rising 0.3 percent month over month and growing to 3.8 percent year over year. Both readings matched economists’ expectations.
Full-time employment surged by almost 900,000, while part-time employment declined by 740,000.
The number of people working two or more jobs dropped by 444,000 to 8.848 million.
Market Reaction
U.S. stocks surged following the December jobs report on hopes that lackluster job gains would push the Federal Reserve to lower interest rates later this year.
The blue-chip Dow Jones Industrial Average climbed by 0.3 percent. The tech-heavy Nasdaq Composite Index ticked up by 0.1 percent, while the broader S&P 500 jumped by 0.2 percent.
Yields on U.S. Treasury securities were up across the board, with the benchmark 10-year edging up to 4.19 percent.
The 2-year, which typically tracks Fed policy expectations, rose by 3 basis points to nearly 3.52 percent.
The U.S. dollar index, a measure of the greenback against a weighted basket of currencies, was little changed at 98.90. The index has had a good start to 2026, rising by 0.6 percent.
“The Federal Reserve is rightly concerned that inflation is taking a long time to get down to their 2% target, but they should be more concerned (at this time) about supporting the labor market, which is why they need to keep cutting interest rates,” Zaccarelli added.
“The stock market is likely to remain cautiously optimistic this year, but upside will be capped until confidence in the underlying job market [is restored].”
Still, as for the January Fed policy meeting, traders are penciling in a near-zero chance of a rate cut, according to data from the CME FedWatch Tool.
Mixed Views of Employment Conditions
Recent statistics suggest employment conditions are sending mixed signals.
Heading into the December nonfarm payrolls report, a flurry of labor data was released, starting with the bureau’s Job Openings and Labor Turnover Survey, or JOLTS.
In November, job openings declined by 303,000 to a lower-than-expected 7.146 million, the lowest since December 2020 and below the market consensus of 7.6 million.
But job quits, which reflect worker confidence in finding employment in today’s labor market, increased by 188,000 to a four-month high of 3.161 million.
Payroll processor ADP reported that private employers added a modest 41,000 new jobs in December, slightly below the market estimate and up from the previous month’s drop of 29,000 positions.
Private-sector payroll growth was driven by a sizable rebound among small- and medium-sized businesses, says Nela Richardson, chief economist at ADP.
“Small establishments recovered from November job losses with positive end-of-year hiring, even as large employers pulled back,” Richardson said in a statement.
December’s planned layoffs declined substantially from the previous month, falling by 50 percent to 35,553. Job cut announcements were also down 8 percent from the December 2024 figures, noted global outplacement firm Challenger, Gray and Christmas.
Labor productivity increased in the third quarter, according to the Bureau of Labor Statistics. Nonfarm productivity increased by 4.9 percent in the July–September period, an increase from an upwardly revised 4.1 percent in the second quarter.
The reading represented the fastest pace in two years, says Sal Guatieri, senior economist at BMO Economics.
“This could mark the start of some payoff from AI-driven automation. As well, companies are in cost-cutting mode and looking to improve efficiencies by hiring fewer [workers],” Guatieri said in a Jan. 8 note.
Productivity rose even as labor costs fell by 1.9 percent, from a downwardly adjusted 2.9 percent plunge. Real (inflation-adjusted) hourly compensation dipped during the quarter and was little changed in the past year.
This, Guatieri says, could present “some downside risk to consumer spending if employment remains weak.”
The number of Americans filing for unemployment benefits, meanwhile, ticked up by 8,000 to 208,000 for the week ending Jan. 3, below market expectations.
