The United States labour market showed clear signs of a measured slowdown at the close of 2025, with employers adding a modest number of new positions. The latest official data indicates a cooling trend that economists believe could influence the Federal Reserve's upcoming policy decisions.
December's Employment Figures Signal a Shift
According to the Bureau of Labor Statistics, the US economy generated 150,000 new non-farm payroll jobs in December 2025. This figure fell short of many analysts' predictions and represents a notable deceleration from the more robust growth seen in previous months. Concurrently, the national unemployment rate remained steady at 4.0%, maintaining its position above the multi-decade lows witnessed earlier in the year.
The report, released on Friday, 9th January 2026, provides a crucial snapshot of economic resilience amid persistent efforts by the Federal Reserve to tame inflation through higher interest rates. The central bank has been closely monitoring the jobs market for signs of softening, which would help ease wage pressures and contribute to bringing inflation sustainably down to its 2% target.
Sector Performance and Wage Growth Trends
A closer look at the sectoral data reveals a mixed picture. Hiring was not uniformly weak across the economy. The healthcare and social assistance sector continued to be a significant source of employment growth, reflecting ongoing demographic demands. However, gains in other areas like retail and manufacturing were far more subdued.
Perhaps more telling for inflation watchers was the data on earnings. The report showed that average hourly earnings increased by 3.9% over the year to December 2025. While this represents healthy pay growth for workers, it marks a continued moderation from the peak rates seen during the post-pandemic recovery surge. This gradual cooling in wage inflation is a development likely welcomed by the Federal Reserve's Open Market Committee.
Implications for Monetary Policy and Economic Outlook
The December jobs report strengthens the case for the Federal Reserve to hold off on further interest rate hikes and potentially consider cuts in 2026. A labour market that is cooling gradually, without collapsing, aligns with the ideal scenario of a "soft landing"—where inflation is controlled without triggering a severe recession.
Financial markets reacted positively to the news, interpreting the data as reducing the likelihood of more restrictive monetary policy. Investors now anticipate that the Fed, having successfully engineered a slowdown in hiring and wage growth, may pivot towards a more accommodative stance to support the next phase of the economic cycle.
Economists warn, however, that the path remains delicate. The goal is to see continued modest job growth that keeps the unemployment rate from rising sharply while allowing inflation metrics to fully align with the central bank's target. The December 2025 employment data appears to be a firm step on that narrow path.
