The Big Picture |
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December’s jobs report shows the U.S. labor market cooled: payroll employment rose by just 50,000 in December and the unemployment rate held at 4.4% (about 7.5 million people out of work). For all of 2025 payrolls rose 584,000 (an average of 49,000 per month), far smaller than the roughly 2.0 million jobs added in 2024. Job gains were concentrated in food service (+27,000), health care (+21,000, including +16,000 in hospitals), and social assistance (+17,000), while retail lost 25,000 jobs. Wages crept up slowly — average hourly pay for private-sector workers rose 0.3% in December to $37.02 and was up 3.8% over 12 months — even as long‑term unemployment rose to 1.9 million (up 397,000 year‑over‑year) and 5.3 million people were working part time but wanted full‑time work (up 980,000).
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Why this matters: the data point to softer demand for steady, full‑time work and only modest pay gains for families, which weakens household income growth and could slow consumer spending. The report itself does not announce new policy changes or implementation steps, but the weaker job and wage picture reduces near‑term pressure for tighter monetary policy and raises the bar for claims that the labor market is overheating. Be skeptical of any single monthly report — revisions trimmed October and November by a combined 76,000 jobs — so watch whether the softness persists in coming months before concluding a durable policy shift.
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Pattern to Watch |
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Emerging pattern: a cooling labor market with rising underemployment. Key indicators pointing to this are the 2025 average monthly payroll gain of about 49,000 (vs. roughly 2.0 million added in 2024), the small December gain of +50,000, downward revisions to prior months (‑76,000 total), a rise in long‑term unemployed to 1.9 million (+397,000), and 5.3 million involuntary part‑time workers (+980,000). If this trend continues it could blunt wage and inflation pressures, reduce consumer spending growth, and influence central bank decisions on interest rates. Watch for continued monthly payroll gains below ~100,000, a sustained rise in the unemployment rate above current levels, further increases in long‑term unemployment and involuntary part‑time work, continued wage growth below about 3–4% year‑over‑year, and how the Federal Reserve responds in its next policy statements.
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