Sluggish December hiring concluded a year of weak employment gains that have frustrated job seekers, even though layoffs and unemployment have remained low.
Employers added just 50,000 jobs last month, nearly unchanged from a downwardly revised figure of 56,000 in November, the Labor Department said Friday. The unemployment rate slipped to 4.4%, its first decline since June, from 4.5% in November, a figure also revised lower.
The data suggests that businesses are reluctant to add workers even as economic growth has picked up. Many companies hired aggressively after the pandemic and no longer need to fill more jobs. Others have held back due to widespread uncertainty caused by President Donald Trump’s shifting tariff policies, elevated inflation, and the spread of artificial intelligence, which could alter or even replace some jobs.
Still, economists were encouraged by the drop in the unemployment rate, which had risen in the previous four straight reports. It had also alarmed officials at the Federal Reserve, prompting three cuts to the central bank’s key interest rate last year. The decline lowered the odds of another rate reduction in January, economists said.
“The labor market looks to have stabilized, but at a slower pace of employment growth,” Blerina Uruci, chief economist at T. Rowe Price, said. There is no urgency for the Fed to cut rates further, for now.”
Some Federal Reserve officials are concerned that inflation remains above their target of 2% annual growth, and hasn’t improved since 2024. They support keeping rates where they are to combat inflation. Others, however, are more worried that hiring has nearly ground to a halt and have supported lowering borrowing costs to spur spending and growth.
November’s job gain was revised slightly lower, from 64,000 to 56,000, while October’s now shows a much steeper drop, with a loss of 173,000 positions, down from previous estimates of a 105,000 decline. The government revises the jobs figures as it receives more survey responses from businesses.
The economy has now lost an average of 22,000 jobs a month in the past three months, the government said. A year ago, in December 2024, it had gained 209,000 a month. Most of those losses reflect the purge of government workers by Elon Musk’s Department of Government Efficiency.
Nearly all the jobs added in December were in the health care, restaurant, and hotel industries. Health care added 38,500 jobs, while restaurants and hotels gained 47,000. Governments — mostly at the state and local level — added 13,000.
Manufacturing, construction, and retail companies all shed jobs. Retailers cut 25,000 positions, a sign that holiday hiring has been weaker than in previous years. Manufacturers have shed jobs every month since April, when Trump announced sweeping tariffs intended to boost manufacturing.
Wall Street and Washington are looking closely at Friday’s report as it’s the first clean reading on the labor market in three months. The government didn’t issue a report in October because of the six-week government shutdown, and November’s data was distorted by the closure, which lasted until Nov. 12.
The hiring slowdown reflects more than just a reluctance by companies to add jobs. With an aging population and a sharp drop in immigration, the economy doesn’t need to create as many jobs as it has in the past to keep the unemployment rate steady. As a result, a gain of 50,000 jobs is not as clear a sign of weakness as it would have been in previous years.
And layoffs are still low, a sign firms aren’t rapidly cutting jobs, as typically happens in a recession. The “low-hire, low-fire” job market does mean current workers have some job security, though those without jobs can have a tougher time.
Ernesto Castro, 44, has applied for hundreds of jobs since leaving his last in May. Yet the Los Angeles resident has gotten just three initial interviews, and only one follow-up, after which he heard nothing.
With nearly a decade of experience providing customer support for software companies, Castro expected to find a new job pretty quickly, as he did in 2024.
“I should be in a good position,” Castro said. “It’s been awful.”
He worries that more companies are turning to artificial intelligence to help clients learn to use new software. He hears ads from tech companies that urge companies to slash workers who provide the kind of services he has in his previous jobs. His contacts in the industry say that employees are increasingly reluctant to switch jobs amid all the uncertainty, which leaves fewer open jobs for others.
He is now looking into starting his own software company and is also exploring project management roles.
December’s report caps a year of sluggish hiring, particularly after April’s “liberation day” tariff announcement by Trump. The economy generated an average of 111,000 jobs a month in the first three months of 2025. But that pace dropped to just 11,000 in the three months ended in August, before rebounding slightly to 22,000 in November.
Last year, the economy gained just 584,000 jobs, sharply lower than the more than 2 million added in 2024. It’s the smallest annual gain since the COVID-19 pandemic decimated the job market in 2020.
Subdued hiring underscores a key conundrum surrounding the economy as it enters 2026: Growth has picked up to healthy levels, yet hiring has weakened noticeably, and the unemployment rate has increased in the last four jobs reports.
Most economists expect hiring to accelerate this year as growth remains solid, and Trump’s tax cut legislation is expected to produce large tax refunds this spring. Yet economists acknowledge there are other possibilities: Weak job gains could drag down future growth. Or the economy could keep expanding at a healthy clip, while automation and the spread of artificial intelligence reduce the need for more jobs.
Productivity, or output per hour worked, a measure of worker efficiency, has improved in the past three years and jumped nearly 5% in the July-September quarter. That means companies can produce more without adding jobs. Over time, it should also boost worker pay.
Even with such sluggish job gains, the economy has continued to expand, with growth reaching a 4.3% annual rate in last year’s July-September quarter, the best in two years. Strong consumer spending helped drive the gain. The Federal Reserve Bank of Atlanta forecasts that growth could slow to a still-solid 2.7% in the final three months of last year.
Is Healthcare the Only Thing Keeping the Labor Market Afloat?
The December Jobs Report is in, and the numbers tell a sobering story. While the headline might show positive growth, a look under the hood reveals a labor market that is effectively flatlining.
In 2025, the U.S. added just 584,000 net jobs. To put that in perspective, that is a 71% drop from the 2.0 million jobs added in 2024. Aside from the anomaly of 2020, this is the weakest year for job creation since 2009.
Here are the three trends that defined the year and what they mean for 2026:
1. The "Healthcare Mask."
Healthcare accounted for nearly 69% of all job growth in 2025. While medical services are a structural necessity for an aging population, a healthy economy requires broad-based growth. Outside of healthcare and modest gains in food services, most sectors are shrinking. The federal government shed 277,000 jobs over the year as the industry restructures and likely undercuts growth in other sectors.
2. The Rise of "Economic Part-Time" Work
The unemployment rate held at 4.4%, but that doesn't tell the whole story. We saw a massive 23% annual surge in people working part-time for economic reasons (5.3 million people). These are workers who want full-time roles but can’t find them. This suggests that while employers aren't doing mass layoffs, they are significantly pulling back on full-time commitments.
3. Job hugging is still hot (and the prolonging of retirement?)
Earlier this week, JOLTS data showed that job openings fell to 7.1 million, and turnover has slowed to a crawl. Two specific data points stand out:
The Quit Rate is stagnant: Workers are choosing stability over risk, with few opportunities for job switching.
Retirements hit a record low: "Other separations" hit their lowest level since data collection began in 2000. Older workers are staying in the workforce longer, likely driven by inflation and affordability concerns.
Between tariff uncertainty and persistent inflation, business confidence is brittle. We are entering 2026 with a labor market that is "staying put" rather than "moving forward." Without a pivot in hiring behavior, we risk another year of sluggish momentum.
What did we learn from today's December BLS jobs report?
The first thing is that it confirms that the U.S. labor market is stable and marching forward, not dipping into a broader slowdown – a holding pattern as the Fed moves to bring interest rates down to more sustainable levels.
Total payroll employment increased by 50,000 jobs in December. This closes out a pretty lackluster year for the job market – the economy added just 584,000 jobs for all of 2025 (averaging 49,000 per month), compared to 2 million jobs a year ago in 2024 (averaging 168,000 per month). The hiring slowdown in the U.S. economy is a real thing -- but it's looking like the worst is behind us, not ahead of us.
The top 3 sectors adding jobs were:
-Leisure and hospitality: +47,000 jobs
-Healthcare: +41,000 jobs
-Government: +13,000 jobs
The bottom 3 sectors losing jobs were:
-Retail trade: -25,000 jobs
-Construction: -11,000 jobs
-Professional services: -9,000 jobs
In terms of unemployment, a lot of people have been worried about the steady but small rise this year. However, the unemployment rate ticked down to 4.4% in December from 4.5% in November. That's still up from 4.1% a year ago, but it's heading in the right direction. The number of unemployed Americans today stands at 7.5 million, just about equal to the number of open jobs.
Although affordability continues to dominate political debates, the data show Americans' real wages are still rising. Year-over-year wage growth rose 3.8% in December, well above inflation, making the broad basket of goods and services measured in the CPI index more affordable to American workers -- not less.