US payrolls undershot expectations in December and prior months were sharply revised lower, but a surprise fall in the unemployment rate and steady wage growth have reinforced expectations that the Federal Reserve will keep interest rates on hold in January.
Experts are reacting to the latest US jobs data below:
Richard Carter, head of fixed interest research at Quilter Cheviot:
“Today’s US employment situation print shows just 50,000 jobs were added in December, down from 64,000 in November. This was below expectations of 60,000 and shows the labour market remains considerably more subdued than in recent years. Healthcare, social assistance, food services and drinking places were among the sectors driving much of the hiring, while retail saw job losses.
“The government shutdown resulted in a period of market labour market weakness, and today’s figures show there is yet to be much of a bounce back, though the unemployment rate saw a slight decline to 4.4% from a revised 4.5% previously. The data also outline the substantial drop in payrolls in 2025 compared to 2024, with just 584,000 jobs added last year compared to 2.0 million the year prior.
“Inflation and GDP data due out over the coming weeks will help to paint a clearer picture of how the US economy is faring. Markets are currently pricing in around two interest rate cuts by the Federal Reserve this year, but whether or not that is realistic remains to be seen. While there is no doubt the labour market has weakened, the question will remain whether it is weak enough to warrant further cuts given inflation is still considerably above the Fed’s 2% target – albeit on the decline.
“Looking ahead, predicting how the Federal Reserve will move throughout the year will be a challenging task. The outlook is murky and things could rapidly change as we have seen time and again before now, but with data still playing a bit of catch up after the lengthy government shutdown last year, for now the best guess is that we can expect the Fed to continue to hold for some time yet.”
Daniele Antonucci, Chief Investment Officer at Quintet Private Bank (parent of Brown Shipley) comments:
“The US labour market data is a mixed bag. On the one hand, the unemployment rate trended lower, and the previous figure was revised down too. But, on the other, payroll growth surprised to the downside and past numbers show weaker growth than initially estimated.
“The biggest surprise is perhaps wage growth, which accelerated beyond most forecasts from an upwardly revised pace. Taken together, there’s probably a bit of everything in this report. Those who want to see the glass half full might point to better unemployment figures. Those who see it half empty might stress that employment growth is now anaemic.
“These numbers come after the disruptions caused by the US shutdown and, on balance, make it difficult to conclude that the job market situation no longer requires policy support. What’s more, Fed chair Powell had questioned the reliability of some of the labour market indicators, suggesting that the US economy might be creating fewer jobs than this report suggests.
“So we think we’re still in play for more Fed rate cuts over the coming months. We remain positioned with a moderate equity overweight, diversified across the main regions, while still owning fewer US Treasuries relative to our long-term allocation and projecting a weaker US dollar over time.
“To further mitigate concentration risks from the dominance of large US tech companies, we stay invested in a US equal-weighted index tilted towards industrials and financials, which could benefit from stimulus and deregulation. Where appropriate, we also use ‘insurance’ strategies which appreciate when equities fall.
“The days when US Treasuries and other developed market government bonds reliably hedged every market shock are behind us. They still offer protection in economic downturns, but not necessarily during inflation or fiscal scares, or episodes of stagflation, when inflation rises and growth slows, when they can fall alongside equities.
“The US dollar remains central to the global system, and we think this is likely to stay the case for the time being. However, its long-term dominance is less secure. The US debt burden continues to grow, and fiscal deficits show little sign of narrowing.”
Chris Beauchamp, Chief Market Analyst at IG:
“Payrolls may have missed forecasts, and the revisions to October and November may have been brutal, but with unemployment falling to 4.4% it doesn’t seem like there’s too much stress in the US labour market. This leaves us with the strong expectation that the Fed will hold rates in January, but remain with an easing bias. 2025 saw the weakest pace of job creation since 2020, but for now the recent weakness has abated.”
Jonathan Moyes, Head of Investment Research at Wealth Club said:
“There were mixed signals in the employment data released this afternoon. Whilst the US economy added fewer jobs than expected, financial markets are paying greater attention to the falling unemployment rate. The Federal Reserve has two jobs, keep prices stable, and promote maximum employment. With falling unemployment, investors are clearly seeing a shallower path for rate cuts into 2026 than many had previously thought.
“Today’s data is another case of good news is bad news. The market is clearly wishing for lower rates in 2026, and any sign that rates are likely to remain higher than expected is bad news for equity and bond prices.
“Towards the end of 2025, concerns were growing that the economy may be experiencing a jobless recovery, with weakening employment in the face of strong corporate earnings. Whilst this is only one employment reading, and the first for four months, it might be the case that the US labour market is doing just fine, and the higher for longer interest rate narrative might not be over just yet.”
Daniel Casali, Chief Investment Strategy at Evelyn Partners, the UK wealth manager, commented:
“Monthly non-farm payrolls have slowed throughout 2025 due to a confluence of factors. These include tighter immigration policies under the Trump administration and a wave of federal employees leaving their jobs after the Department of Government Efficiency offered early retirement and redundancy packages though the Federal Government Deferred Resignation Program.”
Nevertheless, firms still have three reasons to hire, Casali added. Here, he outlines why:
Resilient economic growth: Job creation is supported by solid domestic demand. For example, real final sales to private domestic purchasers – a measure that excludes volatile components like inventories, government spending, and exports – is projected by the Atlanta Fed’s “nowcast” model to grow 2.8% in Q4 and has expanded consistently throughout the year. Moreover, average hourly earnings are rising faster than inflation, reinforcing private consumption. This favourable backdrop should give businesses confidence to take on more staff.
Labour remains relatively inexpensive: In Q3 2025, labour compensation accounted for roughly 50.7% of US GDP, a record low, and is down from a cyclical peak of 57.8% in 2001, the year China joined the World Trade Organisation. China’s integration into global manufacturing expanded labour supply worldwide, suppressing wage growth in advanced economies. Today, the relatively low cost of labour encourages hiring.
Improved labour market efficiency: Advances in telecommunications and digital platforms have enabled firms to redistribute service-sector jobs to regions with higher unemployment and lower wages. Tools like LinkedIn have also enhanced the efficiency of matching jobseekers with vacancies, helping to reduce frictional unemployment and associated costs. The flexibility of the US labour market positions the economy to better absorb shocks, including trade tariffs, as well as policy shifts under the Trump administration.
On balance, relatively soft job creation versus history could prompt the Federal Reserve to consider pro-active interest rate cuts to mitigate the risk of a broad economic downturn and give a liquidity boost to stocks. More fundamentally, the macroeconomic backdrop enhances the likelihood that companies should meet analysts’ earnings expectations and support the equity rally underway.”
