By Lucia Mutikani
WASHINGTON, Jan 9 (Reuters) – U.S. employment growth slowed more than expected in December amid job losses in the construction, retail and manufacturing sectors, but a decline in the unemployment rate to 4.4% suggested the labor market was not rapidly deteriorating.
The Labor Department’s closely watched employment report on Friday also showed solid wage growth last month, bolstering economists’ expectations the Federal Reserve would leave interest rates unchanged at its January 27-28 meeting.
Economists have blamed sluggish job growth on President Donald Trump’s aggressive trade and immigration policies, which they say have reduced both demand for and supply of workers.
Businesses are also holding back on hiring, unsure of their staffing needs as they invest heavily in artificial intelligence. The economy is experiencing a jobless expansion, with growth and worker productivity surging in the third quarter, which was partly attributed to AI.
“All roads lead to the unemployment rate … it should douse the Fed’s recent urgency to backstop a weakening labor market,” said Olu Sonola, head of U.S. economic research at Fitch Ratings. “That said, the weak job-growth story can’t be brushed aside. Hiring is still stuck in stall speed, and job growth in the cyclical parts of the economy isn’t sending a comforting signal.”
Nonfarm payrolls increased by 50,000 jobs last month after a downwardly revised rise of 56,000 in November, the Labor Department’s Bureau of Labor Statistics said. Economists polled by Reuters had forecast a gain of 60,000 jobs after a previously reported increase of 64,000 in November.
The labor market lost considerable momentum last year, with only 584,000 jobs added, averaging 49,000 positions per month. Roughly 2 million jobs were created in 2024, though this number could be revised lower when the BLS publishes its payrolls benchmark revision next month with the January employment report.
The BLS has estimated about 911,000 fewer jobs were created in the 12 months through March 2025 than previously reported.
The overcounting has been blamed on the birth-death model, which is used by the BLS to estimate how many jobs were gained or lost because of companies opening or closing in a given month. The BLS said last month that it would, starting in January, change the birth-death model it uses by incorporating current sample information each month.
DECEMBER JOB GROWTH LIMITED TO HANDFUL OF INDUSTRIES
Job gains last month were confined to a few industries, with employment at restaurants and bars increasing by 27,000 positions. Healthcare industry payrolls rose by 21,000, with most of the gains occurring at hospitals. The increase was well below the average monthly gain of 34,000 jobs in 2025 and 56,000 in 2024. The social assistance sector added 17,000 jobs last month.
The retail industry shed 25,000 jobs, while manufacturing lost another 8,000 positions. Economists have attributed factory job losses to the Trump administration’s tariff increases. Trump has ironically defended the import duties as necessary to revive the manufacturing industry. Construction payrolls decreased by 11,000 in December.
Wages increased 3.8% on a year-over-year basis after rising 3.6% in November, helping to underpin the economy through consumer spending.
U.S. stocks were trading largely flat. The dollar rose against a basket of currencies. U.S. Treasury yields were mixed.
Together with the December employment report, the BLS published annual revisions to the household survey data for the past five years. The unemployment rate is calculated from the household survey.
The annual population control adjustments, normally incorporated with the January employment report, will be released in March. The unemployment rate for November was revised down to 4.5% from the previously reported 4.6%. Economists had expected the jobless rate to ease to 4.5% in December.
Some economists say low supply has prevented a sharp rise in the unemployment rate. They estimated that between 50,000 and 120,000 jobs need to be created each month to keep up with growth in the working-age population.
The Fed cut its benchmark interest rate by a quarter of a percentage point to the 3.50%-3.75% range in December, but U.S. central bank officials indicated they were likely to pause further reductions in borrowing costs for now to get a better sense of the economy’s direction.
With factors like tariffs and AI preventing companies from hiring more workers, economists increasingly view the labor market’s challenges as more structural than cyclical, which would make rate cuts less effective to stimulate job growth.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci, Chizu Nomiyama and Paul Simao)
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