US job growth slowed more than expected in December as businesses remained cautious about hiring amid import tariffs and rising investment in artificial intelligence. The slowdown, however, was accompanied by a dip in the unemployment rate to 4.4%, reinforcing expectations that the Federal Reserve will keep interest rates steady this month.
Nonfarm payrolls rose by 50,000 in December, after a downwardly revised increase of 56,000 in November, the Labor Department’s Bureau of Labor Statistics (BLS) reported. Economists had forecast an addition of 60,000 jobs last month, down from the initially reported 64,000 in November.
The report suggested the labor market remains in a “no hire, no fire” mode, with hiring momentum weakening as companies weigh costs, tariffs, and automation. Economic growth and worker productivity surged in the third quarter, driven in part by the AI investment boom, but employment gains have remained modest.
The BLS said the slowdown reflects broader adjustments in the labor market that began in 2024. It has estimated that about 911,000 fewer jobs were created in the 12 months to March 2025 than previously reported. The agency plans to release payroll benchmark revisions next month alongside the January employment report.
The overcounting of jobs has been attributed to the birth-death model, which estimates monthly employment changes from new and closing businesses. Beginning in January, the BLS will incorporate current sample information into the model to improve accuracy.
Alongside the December report, the BLS released annual revisions to household survey data covering the past five years. The unemployment rate, derived from the household survey, was revised down for November from 4.6% to 4.5%. Economists had expected December’s jobless rate to fall to 4.5%, meaning the actual 4.4% rate came in slightly lower than forecast.
Some analysts noted that labor supply constraints have prevented a larger rise in unemployment. Estimates suggest that 50,000 to 120,000 jobs per month are needed to match growth in the working-age population.
The Federal Reserve reduced its benchmark interest rate by a quarter percentage point to a 3.5%-3.75% range in December. Officials indicated they are likely to pause further cuts for now, seeking a clearer picture of the economy’s trajectory. Economists increasingly view the current labor market challenges as structural rather than cyclical, suggesting that rate cuts alone may not be sufficient to stimulate employment.
The December report highlights a labor market in transition, influenced by trade policies, technology investment, and demographic shifts. While hiring remains subdued, low unemployment suggests that the economy continues to operate near full capacity, even as businesses navigate changing economic conditions.
