U.S. employment growth stalled in December, with nonfarm payrolls increasing by just 50,000 jobs, signaling a labor market that is growing at a very slow pace. Despite the slowdown, the unemployment rate fell to 4.4%, down from 4.5% in November, suggesting the job market is holding steady even as hiring remains subdued.

Economists see these trends as consistent with a “low-hire, low-fire” labor market, where structural factors, including trade policies, tariffs, and the rise of artificial intelligence (AI), are limiting business hiring despite solid economic growth.

---

Nonfarm Payrolls Remain Weak

The Labor Department’s Bureau of Labor Statistics (BLS) reported that nonfarm payrolls rose by 50,000 jobs in December 2025, following a revised gain of 56,000 in November. Economists had expected a slightly higher gain of 60,000 jobs.

Key observations from the report include:

• October job losses were revised upward to 173,000, the largest monthly decline in nearly five years, partly due to federal buyouts.
• Average monthly job gains for 2025 were around 49,000, far below the 168,000 positions added per month in 2024.
• Only 50.8% of industries reported employment growth, down from 55.6% in November.

This slowdown illustrates a “jobless expansion”, where the U.S. economy continues to grow while hiring remains sluggish.

---

Sector Performance: Gains and Losses

December’s weak payroll numbers were concentrated in a few industries:

Job Gains:

• Restaurants and bars: +27,000 jobs
• Healthcare: +21,000 jobs, mostly in hospitals
• Social assistance: +17,000 jobs
• Federal government: +2,000 jobs

Job Losses:

• Retail: -25,000 jobs, reflecting weak holiday season hiring
• Manufacturing: -8,000 jobs, with a total decline of 68,000 in 2025
• Construction: -11,000 jobs, despite milder-than-expected weather
• Transportation, warehousing, professional services, and mining also saw declines

Economists attribute manufacturing job losses to tariffs and trade restrictions, which have slowed hiring in cyclical industries.

---

Wages Continue to Rise

Despite cautious hiring, wages increased 3.8% year-over-year in December, up from 3.6% in November. Strong wage growth is consistent with labor shortages in key sectors and supports consumer spending even as payroll gains remain low.

---

Unemployment Rate and Labor Force Trends

The unemployment rate fell to 4.4%, aided by a combination of declining labor force participation and a modest rise in household employment. However, long-term unemployment remains a concern:

• Median duration of unemployment rose to 11.4 weeks, the highest in four years
• The number of people experiencing long-term joblessness increased

Economists suggest that 50,000–120,000 jobs per month are needed to keep pace with growth in the working-age population. With current hiring levels below this threshold, the labor market is under pressure to maintain its health.

---

Structural Challenges in the Labor Market

Analysts highlight that the slow pace of job creation reflects structural issues rather than cyclical weaknesses:

• Aggressive trade and immigration policies have reduced labor supply and demand
• AI investments are reshaping staffing needs, with companies delaying hires
• Businesses remain cautious, focusing on cost control and operational flexibility

These factors limit the effectiveness of interest rate cuts in stimulating job growth, meaning the labor market’s challenges may persist into early 2026.

---

Federal Reserve Outlook

The data reinforce expectations that the Federal Reserve will likely leave interest rates unchanged at its January 27-28 meeting. The central bank reduced its benchmark rate to 3.50%-3.75% in December 2025, and markets anticipate a continuation of this cautious monetary stance.

Financial markets reacted to the employment report with:

• Higher U.S. stocks
• Stronger U.S. dollar
• Lower long-term Treasury yields

These trends reflect investor confidence that the labor market slowdown is manageable and not indicative of an imminent recession.

---

Key Takeaways

• U.S. nonfarm payrolls increased by only 50,000 jobs in December 2025.
• Unemployment rate declined to 4.4%, showing labor market resilience.
• Job growth concentrated in restaurants, bars, healthcare, and social assistance.
• Retail, manufacturing, construction, and transportation experienced losses.
• Wages rose 3.8% YoY, supporting household income.
• The labor market remains structurally constrained, limiting the impact of Fed rate cuts.