US job creation lost momentum at the end of 2025, with employers adding far fewer roles than expected as the year closed on a subdued note for the labour market.
Official figures from the US Labour Department show that just 50,000 jobs were added in December, undershooting forecasts. Despite the slowdown, the unemployment rate edged lower to 4.4%.
Overall, last year delivered the weakest annual job growth since 2020, when the Covid pandemic triggered widespread job losses across the world’s largest economy.
US labour market slows despite solid economic growth
The cooling employment picture comes amid sweeping policy shifts under US President Donald Trump, including new tariffs, tighter immigration rules and reductions in government spending. While these measures have reshaped the business environment, the wider economy has remained resilient.
The US economy expanded at an annual rate of 4.3% in the three months to September, supported by consistent consumer spending and rising exports. However, that growth has not translated into robust job creation.
On average, employers added just 49,000 jobs per month in 2025, a sharp fall from the estimated two million monthly gains recorded the previous year. The Labour Department also revised figures for October and November, reporting 76,000 fewer jobs than initially thought.
Sector losses offset by services hiring
December’s data revealed uneven trends across industries. Retailers and manufacturers shed jobs, while gains were recorded in healthcare, hospitality, bars and restaurants, helping to cushion overall losses.
The figures highlight a complex environment for US job-seekers. Hiring has slowed significantly over the past year, yet large-scale layoffs have largely failed to materialise.
Federal Reserve cuts rates but divisions remain
In response to the cooling labour market, the US Federal Reserve reduced its key interest rate in a bid to support economic activity. The central bank cut rates three times last year from September, even as inflation pressures lingered.
The benchmark lending rate now sits at around 3.6%, its lowest level in three years. However, policymakers remain divided on how aggressively borrowing costs should be lowered.
The latest employment data is unlikely to settle that debate. After rising to 4.5% in November, the unemployment rate slipped back to 4.4% in December, matching its September level.
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“Today’s report confirms what we think has been evident for some time—the labour market is no longer working in favour of job seekers,” said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.
She added: “Until the data provide a clearer direction, a divided Fed is likely to stay that way. Lower rates are likely coming this year, but the markets may have to be patient.”
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