While the decline in unemployment may suggest stability in the labor market, the details of the report point to a more complex picture.
Uneven Hiring Across Sectors
Job growth was concentrated mainly in leisure and hospitality as well as health care. These industries accounted for the majority of new jobs both in December and throughout 2025. At the same time, five of the eleven major sectors of the economy recorded declines in employment, including retail trade, construction, and manufacturing.
Private-sector employers added only 37,000 jobs, a fraction of the gains seen in the same period a year earlier.
Data Revisions and a Weak Annual Balance
In addition, payroll figures for October and November were revised down by a combined 76,000 jobs, further weakening the picture of labor market momentum. For the full year 2025, employment rose by just 584,000, making it the weakest year for job creation since 2020, when the Covid-19 pandemic triggered a sharp collapse in the labor market.
Labor Force Participation and Long-Term Unemployment
The labor force participation rate slipped to 62.4%, while the share of workers aged 25 to 54 — known as prime-age workers — remained steady. Meanwhile, the number of long-term unemployed people, defined as those out of work for 27 weeks or more, rose by nearly 400,000 in 2025, the largest annual increase since the pandemic.
The number of people working part time for economic reasons also increased sharply, highlighting growing uncertainty among workers.
Market Reaction and the Federal Reserve’s Stance
As the labor market gradually cooled, the Federal Reserve cut interest rates three times toward the end of 2025. Following the release of the December report, however, investors began unwinding bets on further rate cuts. Treasury yields rose, and markets now expect the Fed to keep rates unchanged at its January meeting.
