December Jobs Report Signals Economic Caution; Unemployment Retreats to 4.4%

Fresh employment data from the U.S. Labor Department paints a picture of a labor market hitting the brakes. The December employment report revealed that job creation slowed significantly, with non-farm payroll additions reaching just 50,000 positions—falling well short of the anticipated 60,000. This marks a deceleration from November’s downwardly revised 56,000 positions and stands sharply below the initially reported 64,000.

The weakness extended backward, with October’s job losses now recalibrated to 173,000 positions, substantially worse than the prior estimate of 105,000 positions. These revisions underscore an increasingly cautious stance from employers entering the new year.

Unemployment Rate Edges Lower Despite Weak Hiring

On a brighter note, the unemployment rate ticked down to 4.4% in December from November’s revised 4.5%. The decline defied expectations that had forecast a mere slip to 4.5%, offering a modest counterpoint to disappointing hiring figures. The household employment survey bolstered this picture, registering a 232,000-person increase, though labor force participation simultaneously contracted by 46,000 persons.

Wage Growth Accelerates While Sectors Show Mixed Performance

Average hourly compensation climbed $0.12 to $37.02 in December, representing a 0.3% monthly gain. Year-over-year, wages expanded by 3.8%—an uptick from November’s 3.6% pace. Food services, drinking establishments, healthcare, and social assistance sectors continued attracting workers, while retail shed positions.

Market Commentary: Cautious Outlook Amid Cooling Momentum

“The economy is growing, but unevenly, and employers certainly appear to be cautious about adding additional workers, as evidenced by the still very slow hiring rate in the JOLTS data,” observed Mortgage Bankers Association SVP and Chief Economist Mike Fratantoni.

International economist James Knightley from ING offered a measured assessment: “The dip in the unemployment rate and the respectable wage growth story offers some mitigation, but the jobs market has undoubtedly cooled through 2025. With monetary policy still described as modestly restrictive, it justifies further gradual rate cuts. However, we anticipate that next week’s CPI report could be a little hot, so there is little prospect of action ahead of the March FOMC meeting.”