US economy undershoots expectations to add just 50,000 jobs in December – Financial Times
The US economy added just 50,000 jobs in December, undershooting expectations, in the latest sign that the labour market is cooling after years of strong growth.
Friday’s figure from the Bureau of Labor Statistics fell short of the 70,000 predicted by economists polled by Bloomberg. However, the unemployment rate unexpectedly fell to 4.4 per cent from November’s original 4.6 per cent reading.
The data provides the most complete picture of the US jobs market for several months, after the releases for November and October were heavily affected by the government shutdown.
The November jobs figure was revised down to 56,000 on Friday from an initial reading of 64,000. The unemployment rate for November was revised to 4.5 per cent.
US short-term Treasury yields ticked up slightly after the release of the report, reflecting the lower than expected jobless rate for December. The two-year yield, which tracks expectations for monetary policy, was up 0.03 percentage points to 3.52 per cent.
President Donald Trump, on Thursday evening, posted a graphic on Truth Social that included some of the figures due to be published Friday morning, giving an early glimpse of the closely watched data.
The data release adds to evidence of deterioration in the labour market, which has been hit by cuts to the federal government workforce and a slowdown in private-sector hiring.
The Federal Reserve has cut US borrowing costs at each of its past three meetings, leaving its benchmark target range at a three-year low of 3.5 to 3.75 per cent.
Fed chair Jay Powell signalled in December that the bar to further cuts was high, saying borrowing costs were now “well positioned”.
Economists said the surprise fall in unemployment would bolster the case for the US central bank to pause its rate-cutting cycle at its next meeting later this month.
“Goodbye, January! The Fed will likely hold course for now with the labour market showing tentative signs of stabilising,” said Lindsay Rosner, head of multisector fixed income investing at Goldman Sachs Asset Management. “We expect the Fed to remain on hold for now, but still pencil in two cuts for the rest of 2026.”
Eric Winograd, chief economist at AllianceBernstein, said: “The labour market is stagnant but not collapsing, and I expect that will be sufficient for the Fed to pause in January and await more information rather than continuing to cut rates.”
The Fed has also raised concerns about the accuracy of recent BLS figures, with Powell arguing that the US economy is adding 60,000 fewer jobs a month than the jobs report claims.
Economists expect the central bank to continue cutting borrowing costs later in 2026 amid signs that inflationary pressures are subsiding.
“While this morning’s data is unlikely to incite any urgency for the Fed to cut again in January, the easing bias is clearly intact,” said Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions.
Mike Reynolds, vice-president of investment strategy at Glenmede, said: “The labour market is doing okay, but it’s just really not robust at all with light hiring and also light firing . . . It’s a tenuous balance.”
Still, Reynolds added that the report was “strong enough” to give the Fed “a little bit more patience” on rate cuts.
