December 2025 Jobs Report: A Positive But Cooling Finish to 2025 Payrolls Calendar

The December 2025 jobs report provides the clearest view of labor market conditions in three months following data disruptions from the government shutdown, revealing a labor market that continues to cool while remaining on solid footing. Nonfarm payrolls increased by 50,000 jobs, falling short of the 60,000 consensus estimate but modestly exceeding the 49,000 monthly average recorded throughout 2025. The unemployment rate’s decline to 4.4% from a revised 4.5% in November represents a silver lining, though this metric remains 0.5 percentage points above the start of 2025, indicating gradual labor market deterioration over the year [1][2].

The sector-level data reveals a bifurcated employment landscape, with service-providing industries continuing to drive job creation while goods-producing sectors face headwinds. Food services and drinking establishments added 27,000 positions, health care contributed 21,000 jobs, and social assistance added another 17,000 positions, collectively accounting for the majority of December’s gains. In contrast, retail trade shed 25,000 jobs, and the federal government continued its contraction, down 277,000 positions year-over-year—a 9.2% reduction that reflects ongoing government efficiency initiatives. These sector trends suggest a continuing shift in employment composition toward private service sectors while government employment faces structural pressure [2][3].

Data quality concerns persist as revisions continue to paint a weaker picture of labor market conditions. The Labor Department revised October 2025 payrolls from a previously reported decline of 105,000 jobs to a substantially worse drop of 173,000 positions, while November’s initially reported 64,000-job gain was revised down to 56,000. These combined 76,000-job downward revisions underscore the uncertainty surrounding labor market measurements during a period of significant economic transition and data collection disruptions [2].

The annual employment data reveals a striking deceleration in labor market strength that warrants close attention from economic policymakers and market participants. 2025 recorded just 584,000 total nonfarm payroll additions—the weakest annual hiring pace outside of a recessionary period since 2003. Furthermore, a striking 85% of these annual job gains occurred by April, with minimal net hiring in the remaining eight months of the year. This front-loaded hiring pattern suggests that employers rapidly adjusted their workforce plans early in the year and have since adopted a cautious stance toward expansion [4].

Long-term unemployment dynamics present an emerging concern that could have significant implications for labor force participation and potential productivity growth. The number of workers unemployed for 27 weeks or longer reached 1.948 million, representing 26.0% of total unemployed—marking a substantial year-over-year increase of 397,000 individuals. This rise in structural unemployment suggests matching difficulties between job seekers and available positions, potentially reflecting skill mismatches or geographic dislocation that may require policy intervention to address [2].

Wage growth dynamics remain subdued but consistent with a moderating labor market. Average hourly earnings increased by 0.3% month-over-month and 3.8% year-over-year, reaching $37.02 per hour. While this wage acceleration remains below pre-pandemic norms of approximately 4.0%, it suggests that labor market tightness has not fully dissipated and may provide modest support to consumer spending capacity. The combination of continued wage growth with slowing hiring suggests a gradual normalization rather than a sharp deterioration in labor market conditions [2][3].

: The 2025 hiring slowdown represents the weakest labor market expansion in 22 years, prompting some economists to raise recession concerns. The combination of decelerating job growth, rising long-term unemployment, and contraction in government employment creates a fragile employment backdrop. The manufacturing workweek dipping to 39.9 hours serves as a leading indicator of potential weakness, as reduced hours often precede layoffs during economic downturns. Market participants should monitor these trends closely, as historically, labor market deterioration has been a reliable precursor to broader economic contraction [3][4].

: The December jobs report substantially increases confidence in a rate hold at the January 28-29 FOMC meeting, with CME FedWatch Tool data indicating approximately 97% probability of no change versus 88% prior to the report. The Congressional Budget Office projects the Fed will cut rates to 3.4% by the end of 2028, suggesting a gradual normalization path rather than aggressive easing. For markets, this policy backdrop supports elevated equity valuations while maintaining pressure on rate-sensitive sectors [4][5].

: Economists surveyed by Reuters attribute business caution about hiring to two primary factors: uncertainty surrounding import tariffs and rising artificial intelligence investment. Companies may be delaying hiring decisions pending clarity on trade policy while simultaneously investing in automation technologies that reduce long-term labor requirements. These structural forces could permanently alter employment intensity even if economic growth continues [6].

: The substantial downward revisions to October and November payroll data introduce uncertainty into the economic trajectory. If subsequent revisions continue to deteriorate, the labor market picture may prove weaker than current estimates suggest. This data quality concern argues for cautious interpretation of single-month reports and emphasis on multi-month trends.

The December 2025 jobs report demonstrates a labor market that continues to expand but at a progressively slowing pace, earning its characterization as a “positive but cooling finish” to the year. The 50,000 jobs added modestly exceeded the annual monthly average of 49,000 while remaining below the 50,000-120,000 threshold typically needed to absorb working-age population growth. Sector composition showed continued strength in private service industries, particularly food services, healthcare, and social assistance, offset by weakness in retail trade and federal government employment.

The annual perspective reveals more concerning trends, with 2025 representing the weakest hiring year since 2003 outside of recessionary periods. The front-loading of job gains in early 2025 followed by eight months of minimal net hiring suggests employers have largely completed workforce adjustments and adopted a wait-and-see approach. Rising long-term unemployment and government sector contraction provide additional context for understanding structural shifts in the labor market.

Federal Reserve implications remain largely supportive of the consensus view that the central bank will maintain its current policy stance at the January meeting while positioning for potential cuts later in 2026. Business uncertainty related to trade policy and technological investment appears to be the primary driver of hiring caution, suggesting that labor market outcomes may depend heavily on policy clarity and AI deployment trajectory.

Market reaction to the report was muted across major indices, with the S&P 500 closing virtually unchanged (+0.14%), reflecting the balanced nature of the data—not strong enough to accelerate Fed tightening but not weak enough to trigger recession concerns. Sector rotation showed Energy and Consumer Defensive outperforming while Utilities and Healthcare lagged, suggesting a modest risk-on sentiment following the data release [0].