The U.S. labor market continued to grow at a softer 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 around 55,000 jobs, with forecasts ranging from 40,000 to 100,000, according to Econoday. Employment rose by 584,000 in 2025, an average monthly gain of 49,000. Private sector employers added 61,000 jobs on average each month in 2025.
Despite the headline 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 footing. The market implied odds of the Federal Reserve cutting interest rates at its meeting later this month fell to near zero, a signal that the market thinks the Fed will view these numbers as indicating that the labor market does not need additional support from monetary policy.
Employment continued to rise at restaurants and bars. Retail trade and manufacturing lost jobs. The federal government, which had been shedding jobs, added 2,000, perhaps reflecting the end of the government shutdown. Government-adjacent sectors of healthcare and social assistance added jobs. Leisure and hospitality added jobs. Private payrolls overall grew by 37,000 in November.
Among black Americans, the unemployment rate dropped to 7.5 percent from 8.2 percent. The white unemployment rate edged down to 3.8 percent from 3.9 percent. The Hispanic unemployment rate ticked down to 4.9 percent from 5 percent. Among Asians, the unemployment rate was unchanged at 3.6 percent.
Last month, the Bureau of Labor Statistics published jobs data for October and November after the government shutdown 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. The unemployment rate was initially reported to have climbed to 4.6 percent in November, the highest in almost four years.
That earlier data was revised to show that far more jobs were lost in October and fewer jobs were recovered in November. October is now estimated to have seen a loss of 173,000 jobs and November a gain of 56,000. The unemployment rate for November, however, was revised down to 4.5 percent, better than reported earlier.
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 in the country illegally to depart. Thousands more have been ordered to leave by immigration authorities who have begun enforcing U.S. 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 required to keep unemployment steady—is around 40,000, down from prior estimates of 100,000.
The slowdown in hiring, however, has not slowed economic growth, defying the predictions of many economists. The economy grew at a 3.8 percent annualized pace in the second quarter of this year and then accelerated to a 4.1 percent annualized pace in the third quarter. The Atlanta Fed’s GDPNow gauge, which tracks newly released economic data to estimate growth, has the economy growing at a 5.4 percent pace in the fourth quarter.
This appears to be driven by businesses and workers improving productivity, likely through capital investment and a renewed emphasis on innovation. Productivity rose at a 4.9 percent annualized pace in the third quarter of last year, data from the Department of Labor showed Thursday, and 4.1 percent 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, Secretary of the Treasury Scott Bessent described the administration’s economic strategy as built around “three Is” of innovation, investment, and income. This contrasts with the Biden administration’s economy, which Bessent said was characterized by a different three Is: immigration, high interest rates, and inflation.
The average hourly earnings for all employees on private nonfarm payrolls rose by 12 cents, or 0.3 percent, to $37.02. Over the past 12 months, average hourly earnings have increased by 3.8 percent, handily beating the rate of inflation. As a result, household spending power has grown.
The Trump administration has also been shrinking the size of the federal government’s workforce. Through November, the government’s payrolls shrank by 265,000.
The Federal Reserve held off on cutting interest rates last year despite concerns that the labor market appeared to be softening. Fed chairman Jerome Powell said that the central bank was hesitant to cut rates because it expected President Trump’s tariffs would push up consumer prices significantly, risking higher inflation if households and businesses saw the increases as likely to be part of a longer-lasting pattern for the economy. After months of tariffs and billions of revenue collected, however, any price effects have proved smaller and more contained than many economists expected.
The Fed eventually decided to cut interest rates, reducing its benchmark rate by a quarter point at each of its meetings in September, October, and December. (There was no November meeting.) The Fed has since signaled that it is likely to hold off on further shifts in monetary policy as it watches to see how the economy absorbs those cuts.