Jobs Growth Slows Again, but Falling Unemployment Calms Market Nerves — Evening Brief – 01.09.26
The U.S. labor market closed out the year on a softer—but far from alarming—note. The Bureau of Labor Statistics reported that employers added 50,000 jobs in December, slightly below consensus expectations. More telling, however, were the revisions: October payrolls were cut by 68,000, pushing that month’s tally deeper into negative territory, while November was revised down by 8,000. Combined, employment for October and November is now 76,000 lower than previously reported.
Notably, the initial nonfarm payroll print has now been revised lower in every month of 2025, underscoring a persistent pattern of overestimated hiring momentum.
Even so, the household survey offered a modest offset. The unemployment rate dipped to 4.4%, down from a downwardly revised 4.5% in November. While still among the highest readings since 2021, the decline helped ease concerns that the labor market is on the brink of a sharper deterioration.
Participation metrics were largely unchanged. The labor force participation rate edged down to 62.4%, while the employment-population ratio held steady at 59.7%—both measures showing little movement over the past year.
Wages, meanwhile, came in slightly firmer than expected. Average hourly earnings rose 0.3% month over month, lifting annual wage growth to 3.8%, above forecasts and November’s pace. That resilience in pay suggests labor demand, while cooling, remains supportive of household income.
Kevin Hassett, director of the White House National Economic Council and a leading contender for the next Fed Chair, characterized the report as “somewhat puzzling,” noting that it diverged from other indicators like trade and GDP data showing stronger growth. “The puzzle is resolved if you look at productivity,” Hassett said in a CNBC interview, underscoring the potential efficiency gains amid a slower hiring pace.
For markets, the report landed squarely in “Goldilocks” territory—not strong enough to reignite inflation fears, but not weak enough to force a rapid policy pivot. Expectations now lean toward patience from the Federal Reserve. According to the CME FedWatch Tool, traders boosted the probability of no rate change at the upcoming FOMC meeting to 95%, up sharply from the prior day.