The interpretation

“Obviously, a little bit of a mixed bag,” Dan North, a senior economist with Allianz Trade Americas, told the Washington Examiner. “I think it’s another piece of evidence that the labor market is pretty soft. What I actually might call pretty soggy.”

He pointed out that the headline number came in below expectations and that previous jobs growth was revised down a bit — despite the unemployment rate improving.

“So while it was not a big miss to the downside, I think it is more evidence of a soggy labor market,” he added.

What it means…for Trump

Friday’s report shows that the private sector kept adding jobs to enter the winter, although at a pace slow enough to raise questions about the economy’s underlying health. 

The jobs picture had signaled trouble at various points earlier in 2025. The survey of establishments for October, which was delayed because of the government shutdown and included in the report for November, showed net job losses in the month. But those were largely because of federal government separations. 

The jobs reports also showed losses for August and June. The negative number for June led President Donald Trump to fire the commissioner of the agency.

A major question still hanging over the jobs market is the role played by Trump’s immigration policies, which have massively slowed net migration into the country and may even have turned it negative. 

Lower immigration rates likely slow the growth of the workforce. They might not entail rising unemployment, though, since a decline in immigrant labor would also shrink the denominator of the unemployment rate. 

What it means for…the Fed

Friday morning’s report led investors to slightly decrease the odds that Federal Reserve officials will cut their interest rate target at their next meeting, scheduled for late January. A rate cut is now seen as off the table. 

Trump has pressed for months for Chairman Jerome Powell to lower rates to boost borrowing and spending.

The underlying reality

Friday’s report showed that the economy is losing jobs, but with the major caveat that the job losses have come from the government, while the private sector has been adding workers. 

It is helpful to look at the overall trend for the labor market. With revisions to the numbers for October and November, the three-month moving average of job gains was -22,000 in December. 

Private-sector job gains, though, have averaged nearly 30,000 over the past three months.

Roughly 114,000 new payroll jobs are needed each month to keep unemployment from rising – the “breakeven rate” of job growth – according to one estimate from the Federal Reserve Bank of Atlanta. 

But that figure is highly uncertain, thanks to the Trump administration’s crackdown on illegal immigration. The breakeven rate might be closer to zero if net migration has stalled, and it might even be negative if more people are leaving the country than entering. 

Prime-age employment, relative to the overall population, is strong by historical standards. It rose slightly in December.

Recession watch

The unemployment rate, taken from the jobs report’s household survey, is still low by historical standards, although it has been drifting upward. It fell two tenths of a percentage point to 4.6% in December.

Recessions entail a rising unemployment rate.

Friday’s data suggests that the U.S. labor market is coming closer to triggering one major recession indicator — namely, when the three-month moving average of the unemployment rate rises half a percentage point relative to its minimum point over the past year. This indicator, known as the Sahm Rule, had signaled the start of all post-war recessions.

The indicator had been triggered in mid-2024, but is not signaling a recession right now.

Federal government employment

Federal government employment rose by 2,000 in December, after plunging in October thanks to the end of the “deferred resignation” promoted by the Trump administration at the end of September. Federal employment is now down about 277,000 since Trump came into office. The number of federal employees is a key statistic to watch to see the effects of the budget-cutting efforts of the Trump administration and the Department of Government Efficiency.

Manufacturing employment

Employment in manufacturing declined by 8,000 in December, adding to a downward trend. 

The manufacturing sector is of particular interest because Trump has said that his tariffs will bring manufacturing to the U.S. from other countries. He’s imposed tariffs on China and trading partners around the world, and on steel, aluminum, autos, auto parts, and a number of other goods and services. 

So far, though, the sector has lost 63,000 jobs during his time in office. 

Other industries

The leisure and hospitality sector has, over the past year, exceeded the employment levels it reached in February 2020, right before restaurants and bars were forced to shut down across the country. It’s grown steadily, setting aside a very slight decline in November. 

Construction employment appears to have stalled out after the housing market took a massive hit over the past few years as mortgage rates have soared alongside the Fed’s rate hikes. The sector is also under pressure from Trump’s tariffs and his immigration overhauls. It shed 8,000 jobs in December.

Economists will watch closely for any further signs of slowing hiring in construction.

Unemployment rates by race/ethnicity

The household survey also includes unemployment rates by race and ethnicity. Rates for all groups neared record lows in the past few years, but have risen in recent months.

In particular, the unemployment rate for black workers was 7.5% in November, up nearly 1.5 percentage points on the year.