The US added fewer jobs than expected in December, leaving the world’s largest economy with the smallest annual gain since the start of the pandemic in 2020.
Employers added just 50,000 jobs last month, nearly unchanged from a downwardly revised figure of 56,000 in November, the US Labor Department said on Friday. The unemployment rate, however, slipped to 4.4 per cent, its first decline since June, from 4.5 per cent in November, a figure that had also been revised lower.
The jobless rate was in line with forecasts and suggests some underlying strength in the labour market, which showed signs of a slowdown for most of 2025. Wage growth, a measure of inflationary pressures, rose unexpectedly to 3.8 per cent from 3.6 per cent. Analysts had expected a softening to 3.5 per cent in average hourly earnings.
In an initial reaction to the latest jobs data traders raised their bets that the Federal Reserve would hold interest rates in their current range of 3.5 to 3.75 per cent to 95 per cent from 89 per cent a day earlier.
Policymakers at the central bank have said they are worried about the cooling labour market, which is suffering from a reduction in hiring. Figures this week showed the number of job openings across the economy is at the lowest since 2014. Payrolls in the private sector rose by 37,000, declining from the 50,000 recorded in November.
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Olu Sonola, head of US economics at Fitch Ratings, said: “Hiring is still stuck in stall speed and the cyclical parts of the economy aren’t sending a comforting signal.”
The Fed has said it is paying more attention to the unemployment rate, which has spiked to a four-year high, but which it expects to gradually fall over 2026.
Jerome Powell, chairman of the Fed, has said payroll numbers are over-estimating jobs growth by about 60,000 a month — suggesting jobs growth has been stagnant and negative in recent months.
The Fed lowered interest rates three times in the second half of 2025 and traders are betting on two further cuts this year, beginning in June, to take borrowing costs to 3-3.25 per cent.
The dollar traded flat against a basket of major currencies including the pound at $1.34. Yields on US government debt were also broadly unchanged and equities on Wall Street pointed to modest gains in pre-market trading on Friday.
Stephen Brown, deputy chief North America economist at Capital Economics, said the drop in the jobless rate to 4.4 per cent suggested the labour market was “looking in slightly better health than the more dovish members of the Fed feared, suggesting that the Fed will be in no rush to resume interest rate cuts.
“The fall in the unemployment rate confirms our suspicions that the government shutdown explained some of the earlier increase and leaves the unemployment rate modestly below the Fed’s projection for the fourth quarter overall of 4.5 per cent.
“Together with signs that GDP growth is on track for a bumper fourth quarter, this should keep the Fed on hold for at least the next few months, providing that the annual benchmark revision in the next employment report does not throw up any major surprises.”