Labor market ends 2025 with weak December job growth

• Key insight: December job growth was modest with gains concentrated in restaurants and bars.
• Supporting data: Revisions to prior months show October payrolls fell 173,000, a significant reduction from the initial estimated 105,000 jobs lost.
• Forward look: The weak, narrowly spread December hiring numbers supports the Fed’s cautious stance on further rate cuts.

The labor market ended on soft footing in 2025, with employers adding just 50,000 jobs in December and the unemployment rate slightly down to 4.4% from 4.6% the month prior, according to data from the Bureau of Labor Statistics released Friday.

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Hiring growth remained slow, down from the already sluggish 64,000 jobs added in November, capping what was one of the weakest years of job growth, save for economic crisis periods, in over a decade.

Job gains were concentrated largely in service industries. Restaurants and bars added 27,000 jobs, health care added 21,000, and social assistance added 17,000. Retail trade cut 25,000 jobs, with losses spread across general merchandise and food retailers. Most other major sectors like manufacturing, construction, finance and professional services remained mostly flat.

Upon further examination, signs of market cooling were more pronounced. Average weekly hours fell to 34.2, and the number of people working part time despite wanting full-time employment continued to grow. Long-term unemployment held steady at 1.9 million, but remained elevated by 397,000 compared with a year earlier, accounting for about one-quarter of all unemployed workers.

Wage growth was steady but no longer accelerating. Average hourly earnings rose 0.3% in December and were up 3.8% from a year earlier, a pace consistent with easing inflation pressures but weaker bargaining power for workers.

Alongside revised data from earlier months, December confirms that the slowdown is not a one-off. Revisions to prior months of data underscored the labor market’s precarity closing out the year. October payrolls were revised down to a loss of 173,000 jobs, from an already-weak initial estimated loss of 105,000, while November’s gains were trimmed to 56,000, down from 64,000. 

Friday’s numbers provided further evidence of a prolonged slowdown that has been building for months, echoing Federal Reserve officials’ pessimism leading into 2026. Minneapolis Federal Reserve President Neel Kashkari on Monday expressed concern about signs of a cooling labor market in 2026 at a time when inflation remains elevated.

Senator Elizabeth Warren, D-Mass., characterized the numbers as a sign of the economy being in worse shape than a year prior. 

“Today’s report shows that more than 600,000 additional people are unemployed today than before President Trump took office,” Warren wrote in a statement. “Growth in 2025 was the weakest in over a decade, outside of the pandemic … the second year of the Trump presidency is kicking off with a weaker job market and higher prices.”

December’s jobs report showing hiring remains weak and in narrow industries reinforces Fed Chair Jerome Powell’s view that the labor market has softened substantially to justify a pause and assess the effects of last fall’s rate cuts. The data, however, stops short of the kind of deterioration that would force the Fed’s hand, given some officials remain uneasy about inflation’s trajectory.

At the end of 2025, the Fed’s Federal Open Market Committee cut short-term interest rates by 75 basis points, moving the policy rate most recently to a range of 3.5% to 3.75% amid concerns about the paltry labor gains. The committee overwhelmingly voted to cut rates by 25 basis points, despite disagreement among officials.

Fed Governor Stephen Miran warned last month that trade restructuring and supply chain realignment could keep goods prices elevated and complicate the picture. December’s modest job gain, flat participation rate and rising rate of involuntary part-time work point to cooling demand and weaker employer confidence.