Hiring slowed in December, defying Federal Reserve's effort to boost labor market
Hiring ticked down in December, defying the Federal Reserve's effort to boost hiring with a recent series of interest rate cuts, a jobs report on Friday showed. The reading fell short of economists' expectations.
The U.S. added 50,000 jobs in December, which marked a slight drop from 64,000 jobs added in the previous month.
The unemployment rate dropped to 4.4% in December from 4.6% in November, the Bureau of Labor Statistics (BLS) said. Unemployment remains low by historical standards but had ticked up from previous lows.
As in previous months, the healthcare sector accounted for the lion's share of hiring in December, adding 21,000 jobs, according to the BLS. The food service and social assistance industries also contributed to the hiring figure.
In all, the economy added an average of 49,000 jobs each month in 2025, registering a significant slowdown from 168,000 jobs added per month in 2024, the BLS said.
The fresh data comes two weeks after a blockbuster report on economic growth appeared to rebuke worries about the wider economy prompted by the hiring cooldown.
The U.S. economy grew at a robust annualized rate of 4.3% in the third quarter in the government's initial estimate, marking an acceleration from 3.8% growth recorded in the previous quarter, the U.S. Commerce Department said in December.
A boost in consumer spending helped propel the economic surge, the department added, suggesting that many consumers continued to open their wallets even as their attitudes worsened.
Meanwhile, inflation dropped in November, the most recent month for which data is available. The cooldown ended a monthslong acceleration of price increases and offered some relief for households strained by cost hikes.
Inflation remains well below a 2022 peak but stands nearly a percentage point above the Fed’s target of 2%.
The onset of elevated inflation alongside sluggish hiring has put the Fed in a difficult position.
The central bank must balance a dual mandate to keep inflation under control and maximize employment. To address pressure on both of its goals, the Fed primarily holds a single tool: interest rates.
Starting in September, the Fed cut interest rates at three consecutive meetings, opting to address the flagging labor market. The benchmark rate stands at a level between 3.5% and 3.75%.
That figure marks a significant drop from a recent peak attained in 2023, but borrowing costs remain well above a 0% rate established at the outset of the COVID-19 pandemic.
Futures markets expect two quarter-point interest rate cuts this year, forecasting the first in April and a second in the fall, according to CME FedWatch Tool, a measure of market sentiment.
After the Fed's most recent rate cut in December, Fed Chair Jerome Powell suggested the central bank may be cautious about further rate reductions.
"We're well positioned to wait and see how the economy evolves," Powell said.
