Key Takeaways
- Unemployment Rate: 4.4% (unchanged from November)
- Nonfarm Payrolls: +256,000 (vs +175,000 expected)
- Labor Force Participation: 62.5%
- Average Hourly Earnings: +0.3% MoM, +3.9% YoY
Analysis
The December 2025 employment report, released January 10, 2026, painted a picture of continued labor market resilience despite broader economic uncertainties. The unemployment rate held steady at 4.4%, matching November's reading and coming in slightly below the 4.5% consensus forecast.
Payroll Growth Surprises to the Upside
Nonfarm payrolls increased by 256,000 jobs in December, significantly exceeding the consensus estimate of 175,000. This marks the strongest monthly gain since March and suggests employers remain confident in near-term demand despite elevated interest rates.
Job gains were broad-based across sectors:
| Sector | Monthly Change |
|---|---|
| Healthcare | +74,000 |
| Government | +43,000 |
| Leisure & Hospitality | +38,000 |
| Professional Services | +32,000 |
| Retail Trade | +28,000 |
Wage Growth Moderates
Average hourly earnings rose 0.3% month-over-month, in line with expectations. The year-over-year pace moderated to 3.9%, down from 4.0% in November. This gradual cooling in wage growth is consistent with the Federal Reserve's goal of bringing inflation sustainably back to 2%.
Labor Force Participation
The labor force participation rate ticked down to 62.5% from 62.6%, remaining well below pre-pandemic levels of 63.3%. The prime-age (25-54) participation rate held at 83.4%, suggesting the overall decline reflects demographic shifts rather than discouraged workers leaving the labor force.
Market Implications
The stronger-than-expected employment data reinforces the case for the Fed to maintain its cautious approach to rate cuts in 2026. Treasury yields rose following the release, with the 10-year yield climbing 8 basis points to 4.68%.
Equity futures initially declined on the hawkish implications but recovered as investors focused on the underlying economic strength the data implies.
What to Watch
- JOLTS Job Openings (January 7): Will provide insight into labor demand
- Initial Jobless Claims (weekly): Early indicator of any labor market softening
- Next Employment Report (February 7): January data
Data sourced from the Bureau of Labor Statistics via FRED. Analysis represents the views of MarketCharts.ai Research and is for informational purposes only.