The U.S. labor market ended 2025 on a low note, with employers adding just 50,000 jobs in December, underscoring a year marked by slow hiring and growing uncertainty about economic momentum. While layoffs remain relatively contained, the pace of job creation has slowed to levels not seen outside of recessions in more than two decades.
December’s report confirmed that the labor market is no longer providing the same cushion it once did for growth, even as the unemployment rate unexpectedly edged lower. For policymakers and investors alike, the data reinforced the view that the economy has entered a prolonged cooling phase rather than a sharp downturn.
Hiring Slows To A Post-Pandemic Low
Payroll gains in December fell well short of expectations, closing out a year in which total job growth dropped dramatically from prior levels. The U.S. added roughly 584,000 jobs in 2025, down from about 2 million in 2024, making it the weakest year for hiring outside of a recession since the early 2000s.
Economists note that revisions are likely to further soften the picture. Updated data showed November and October payrolls were revised lower, continuing a pattern seen throughout the year. Several forecasters now expect final revisions to reveal periods of outright job losses during 2025.
Unemployment Rate Falls, But Underlying Strain Builds
Despite weak hiring, the unemployment rate declined to 4.4% in December, reflecting slower labor force growth rather than renewed demand for workers. Immigration policy changes and reduced workforce expansion played a key role in limiting headline unemployment increases.
Beneath the surface, signs of stress are becoming clearer. The share of unemployed workers who have been out of a job for six months or longer rose to its highest level since early 2022. Surveys also show growing anxiety among workers about their ability to find new employment if laid off quickly.
Healthcare Masks Broader Job Weakness
Healthcare and social assistance once again led the way in job growth in 2025, accounting for the majority of the net gains. Without those sectors, economists estimate the labor market would have posted net job losses for the year. Outside of healthcare, hiring remained tepid across manufacturing, retail, and professional services, reflecting cautious corporate behavior amid tighter financial conditions, trade uncertainty, and uneven consumer demand.
Mixed Signals From Private Data
While the government jobs report painted a weak picture, recent private-sector indicators offered modest signs of stabilization. Layoff announcements fell to their lowest level in months, and private payroll data showed small gains in December. Other high-frequency measures suggest payroll growth may have bottomed late in the year, though economists caution that these signals remain tentative and uneven across industries.
Looking Ahead
As 2026 begins, the labor market appears stuck in a fragile equilibrium — slow hiring, limited layoffs, and growing anxiety beneath stable headline numbers. For the Federal Reserve, the report strengthens the case for holding interest rates steady in the near term. For investors, the key question is whether hiring stabilizes from here or slips into contraction as higher borrowing costs, policy uncertainty, and cautious corporate spending continue to weigh on job creation.