The US labor market continued to grow at a slow pace in December, while the unemployment rate fell sharply.
The U.S. economy created 50,000 jobs in December and the unemployment rate fell to 4.4 percent, the Labor Department said Friday.
Economists were expecting about 55,000 jobs, according to Econoday, with forecasts ranging from 40,000 to 100,000. Employment increases to 584,000 in 2025, with average monthly gains of 49,000. Private sector employers added an average of 61,000 jobs per month in 2025.
Despite the key jobs number falling short of expectations, the report is being interpreted by markets and analysts as a sign that the labor market has regained some of its grip. The market anticipated that the likelihood of the Federal Reserve cutting interest rates at its meeting later this month has approached zero, an indication that the market thinks the Fed will view these data as a sign that the labor market does not need additional support from monetary policy.
Employment in restaurants and bars continued to increase. Jobs were lost in retail trade and manufacturing. The federal government, which had been losing jobs, added 2,000 jobs, perhaps marking the end of the government shutdown. Jobs were added in government-related sectors of healthcare and social assistance. Leisure and hospitality added jobs. Private payrolls overall increased by 37,000 in November.
The unemployment rate among black Americans fell from 8.2 percent to 7.5 percent. The white unemployment rate dropped from 3.9 percent to 3.8 percent. The Hispanic unemployment rate dropped from 5 percent to 4.9 percent. The unemployment rate among Asians remained unchanged at 3.6 percent.
Last month, the Bureau of Labor Statistics published jobs data for October and November after the government shutdown had delayed the collection and release of economic reports. It showed the economy added 64,000 jobs in November after losing 105,000 jobs in October. It was initially reported that the unemployment rate rose to 4.6 percent in November, the highest in nearly four years.
Earlier data was revised to show that far more jobs were lost in October and fewer jobs were recovered in November. It is now estimated that there was a loss of 173,000 jobs in October and a gain of 56,000 jobs in November. However, the unemployment rate for November was revised upward to 4.5 percent, better than previously reported.
Hiring has slowed in 2025 as employers adjust to an economy with a slower growing workforce. President Trump’s immigration policies have encouraged many workers to depart the country illegally. Thousands more have been ordered to leave by immigration authorities, who have begun enforcing US law after years of neglect under President Biden. Economists now think the “break-even” rate for the U.S. economy – the pace of job creation needed to keep unemployment stable – is about 40,000, down from a prior estimate of 100,000.
However, the slowdown in hiring has not slowed economic growth, defying the predictions of many economists. The economy grew at an annual pace of 3.8 percent in the second quarter of this year and then at an annual pace of 4.1 percent in the third quarter. The Atlanta Fed’s GDPNow gauge, which tracks newly released economic data to gauge growth, shows the economy growing at a 5.4 percent pace in the fourth quarter.
This appears to be driven by improvements in productivity by businesses and workers, possibly due to a renewed emphasis on capital investment and innovation. Labor Department data on Thursday showed that productivity grew at an annual pace of 4.9 percent in the third quarter of last year, and at a 4.1 percent pace in the second quarter.
The Trump administration says its policies are driving this shift from growth through immigration to growth through investment. In a speech in Minneapolis on Thursday, Treasury Secretary Scott Besant described the administration’s economic strategy as built around the “three issues” of innovation, investment and income. This contrasts with the Biden administration’s economy, which Besant said is characterized by three distinct features: immigration, high interest rates, and inflation.
Average hourly earnings for all workers on private non-farm payrolls rose 12 cents, or 0.3 percent, to $37.02. Over the past 12 months, average hourly earnings have increased by 3.8 percent, which beats the rate of inflation. As a result, household spending power has increased.
The Trump administration is also shrinking the size of the federal government’s workforce. By November, government salaries were reduced by 265,000.
The Federal Reserve held off on cutting interest rates last year despite concerns about a softening labor market. Fed Chairman Jerome Powell said the central bank was hesitant to cut rates because it expected President Trump’s tariffs to cause consumer prices to rise significantly, part of a longer-term pattern for the economy if households and businesses saw an uptick. However, after months of tariffs and billions in revenue collected, any price effects have proven smaller and more controlled than many economists expected.
The Fed ultimately decided to cut interest rates by lowering its benchmark rate by a quarter point at each of its meetings in September, October and December. (There was no meeting in November.) The Fed has since signaled it may hold off on further changes to monetary policy as it waits to see how the economy absorbs those cuts.
