New data released on Friday showed modest job growth in December, reinforcing signs of a cooling employment environment heading into 2026.
The economy added 50,000 jobs during the month, according to the Labor Department, below the median estimate of 70,000 from economists surveyed by Bloomberg.
Despite the softer payroll gain, the unemployment rate edged down to 4.4% from 4.6% in November, compared with expectations for a 4.5% reading.
Household survey data showed little change in overall labor market conditions. The number of unemployed people stood at 7.5 million in December, roughly unchanged from the prior month.
Broader measures of labor market engagement remained stable. The labor force participation rate held at 62.4%, while the employment-population ratio was unchanged at 59.7%, both levels showing little movement over the course of the year.
Kathleen Brooks, XTB research director, described the report as both dovish and hawkish.
“The weak payrolls report combined with a lower unemployment rate suggests that the narrative has not shifted for the US labour market,” Brooks wrote.
“The US is still a low hire and low fire environment. This does not shift the dial for the Fed, aside from confirming that a rate cut in January is highly unlikely.”
Wells Fargo analysts agreed that the employment report does not meaningfully changing the outlook for US monetary policy.
“The cooling in the labor market still appears to be proceeding at an orderly and gradual pace, which likely will leave the FOMC on hold at its upcoming meeting on January 28,” they wrote.
“But with the unemployment rate still above our estimate of full employment, underlying inflation slowly cooling and the policy rate setting above neutral, we remain of the view that a couple more rate cuts this year is a reasonable base case.”