WASHINGTON (AP) — Employers added just 50,000 jobs in December, a sluggish finish to a year that has frustrated many job seekers even as layoffs and unemployment stayed low, the U.S. Labor Department reported Friday. The unemployment rate slipped to 4.4%, its first decline since June, down from 4.5% in November.
The monthly employment gain was nearly unchanged from a downwardly revised November figure of 56,000, and the government also revised previous data as it received more survey responses from businesses. The data suggested businesses were reluctant to add workers even as economic growth picked up, closing out a 2025 marked by weak employment gains.
Economists pointed to several reasons for the slowdown. Many firms had hired aggressively after the pandemic and no longer needed to fill additional jobs, while others held back amid uncertainty tied to President Donald Trump’s shifting tariff policies, elevated inflation, and the spread of artificial intelligence, which could alter or replace some types of work.
The unemployment drop drew some encouragement, after the rate had risen in the previous four straight reports. The Labor Department’s employment picture, however, also added to concerns at the Federal Reserve. The Fed cut its key interest rate three times last year, partly in response to weaker labor-market conditions, and officials have been weighing whether inflation is easing enough to continue adjustments.
Blerina Uruci, chief economist at T. Rowe Price, said the labor market appeared to stabilize but with slower employment growth. “The labor market looks to have stabilized, but at a slower pace of employment growth,” Uruci said. She added: “There is no urgency for the Fed to cut rates further, for now.”
In the Fed’s internal discussions, some officials have said inflation has not improved since 2024 and remains above the central bank’s target of 2% annual growth, arguing for keeping rates where they are to combat inflation. Others have worried that hiring is nearly ground to a halt and have supported lowering borrowing costs to spur spending and growth.
Sector-by-sector, nearly all of the December job gains came in health care and in restaurants and hotels, with governments contributing as well. Health care added 38,500 jobs, while restaurants and hotels gained 47,000. Governments, mostly at the state and local level, added 13,000, while manufacturing, construction and retail companies shed jobs.
Retailers cut 25,000 positions, a sign the report said holiday hiring was weaker than in previous years. Manufacturing job losses also continued, with manufacturers shedding jobs every month since April, when Trump announced sweeping tariffs intended to boost manufacturing.
Wall Street and Washington watched the report closely because it was the first “clean reading” on the labor market in three months. The government did not issue a report in October because of a six-week government shutdown, and the November data was distorted by a closure that lasted until Nov. 12.
Beyond the month-to-month changes, the report described a broader pattern of subdued hiring through 2025. The economy gained 584,000 jobs in 2025, far below the more than 2 million added in 2024, making it the smallest annual gain since 2020. Outside recessions, it was also the smallest annual increase since 2003, with hiring especially weak after April’s “liberation day” tariff announcement by Trump.
The report also highlighted a dispute in messaging from the White House. Trump boasted on social media late Thursday that since January all new jobs were in the private sector while government jobs declined, but the report said his figures included December’s jobs numbers and revisions to prior months that the White House received Thursday afternoon before the data were released publicly. On Truth Social, Trump said businesses added 654,000 jobs since January and that government jobs declined by 181,000.
For some job seekers, the slowdown has translated into stalled prospects despite low layoffs. Ernesto Castro, 44, told the Associated Press that he has applied for hundreds of jobs since leaving his last job in May but has had just three initial interviews and only one follow-up, after which he heard nothing. “It’s been awful,” Castro said. He said he was looking for work in customer support for software companies and worried that more firms are turning to artificial intelligence, including through ads urging companies to reduce workers in favor of AI.
The report also included an example from business leadership on how tariffs can spill into hiring plans. Steve Heckeroth, CEO of Renewables, Inc., said tariffs forced him to put off hiring in recent months. Heckeroth said he has delayed hiring to build electric tractors after shifting costs for parts and components overseas. “It’s delayed us at least six months, the tariffs, just not knowing what our input prices are going to be,” he said.
Heckeroth described having considered axles and transmissions from India that were hit earlier this year with a 50% tariff, and said many electronic components come from China, which has faced an array of often-shifting duties. He said those changes have disrupted production planning and delayed staffing.
Even with hiring weak, the report said productivity has improved and helped cushion the labor-market slowdown. It said productivity jumped nearly 5% in the July-September quarter and has improved over the past three years, meaning companies can produce more without adding jobs. The report also said the economy expanded at a 4.3% annual rate in last year’s July-September quarter, supported by strong consumer spending, and that the Federal Reserve Bank of Atlanta forecast growth could slow to 2.7% in the final three months of last year.
As 2026 begins, economists expect hiring could accelerate this year if growth remains solid and if tax refunds from Trump’s tax cut legislation arrive this spring, but the report noted other possibilities. It said weak job gains could drag down future growth, or that the economy could keep expanding while automation and the spread of artificial intelligence reduce the need for more jobs.