On Friday morning at 8:30 Eastern, the Bureau of Labor Statistics will release the employment situation report for December 2025—the final piece of a labor market puzzle that has confounded economists throughout the year. The numbers are expected to confirm what has become increasingly clear: 2025 was the weakest year for job creation since the depths of the 2008-2009 financial crisis.

The consensus among economists surveyed by Dow Jones is for approximately 55,000 new nonfarm payroll jobs, down from November's gain of 64,000. The unemployment rate is expected to hold steady or edge down slightly from 4.6%—a four-year high that represents a meaningful softening from the 3.4% low reached in early 2023.

The 2025 Labor Market in Context

To understand December's expected weakness, it's essential to grasp what happened throughout 2025. The year saw average monthly job gains of roughly 50,000—a dramatic slowdown from the pandemic recovery years when gains regularly exceeded 200,000 per month.

Several factors contributed to the deceleration:

  • Normalization: The post-pandemic hiring surge exhausted pent-up demand for workers in many sectors
  • Interest rate effects: Elevated borrowing costs dampened business investment and hiring
  • Government shutdown: A 43-day federal shutdown from October to mid-November disrupted economic activity and hiring
  • Sector rotation: Job losses in technology and finance offset gains in healthcare and government
  • Tariff uncertainty: Trade policy unpredictability caused many businesses to pause hiring decisions

The Indeed Hiring Lab's characterization captures the essence: "A 'low-hire, low-fire' environment in which both employers and job seekers face a slower, more selective market." Companies aren't aggressively hiring, but they're also not conducting mass layoffs.

What to Watch in Friday's Report

Beyond the headline payroll number, several components of the December report will receive intense scrutiny:

Unemployment rate:

The jobless rate has risen from 3.7% at the start of 2025 to 4.6% in November. Any further increase toward 4.7% would raise recession concerns, while a decline would suggest the labor market is stabilizing. The Fed's latest projections assume unemployment peaks around 4.5-4.6%, so the December reading will test that forecast.

Wage growth:

Average hourly earnings are expected to rise approximately 0.3% month-over-month and 3.5% year-over-year. Wage growth has been moderating—good news for inflation hawks but potentially concerning if it reflects reduced worker bargaining power.

Labor force participation:

The share of adults working or looking for work has been remarkably stable near 62.5%. Any decline would suggest workers are dropping out of the labor force, which could artificially suppress the unemployment rate.

Hours worked:

Average weekly hours provide insight into employer demand. A decline in hours often precedes layoffs, as companies reduce work before reducing headcount.

Revisions:

Previous months' data frequently gets revised. Significant downward revisions to October or November would paint a weaker picture of recent trends.

Sector-by-Sector Expectations

Not all industries are experiencing the labor market similarly. December expectations vary significantly by sector:

Expected gains:

  • Healthcare: The sector has been the most consistent job creator, driven by aging demographics and staffing recovery
  • Government: Public sector hiring has remained steady, particularly at state and local levels
  • Logistics: Holiday shipping demand typically supports December employment in warehousing and delivery

Expected weakness:

  • Retail: Holiday hiring was subdued this year, and some seasonal workers may have already been released
  • Technology: The sector continues to shed jobs as AI adoption reduces demand for certain roles
  • Financial services: Elevated rates have dampened mortgage and lending activity, reducing hiring
  • Manufacturing: Factory employment has been contracting for months amid weak demand

The Government Shutdown's Shadow

One complicating factor in interpreting December data is the lingering effect of the government shutdown. The 43-day closure, which ended in mid-November, disrupted not just federal employment but also contractors, local businesses serving federal workers, and economic data collection itself.

The October employment report was cancelled entirely due to the shutdown. November data may have been affected by post-shutdown catch-up hiring and spending. December could reflect further normalization—or continued disruption.

The Bureau of Labor Statistics has indicated that December data incorporates annual revisions to seasonally adjusted household survey data, adding another layer of complexity to interpretation.

Market Implications

Friday's report will influence both Federal Reserve policy expectations and broader market sentiment:

Weak report (below 30,000 jobs or unemployment above 4.7%):

  • Would boost expectations for Fed rate cuts, potentially as early as March
  • Risk assets might initially rally on rate cut hopes
  • Recession fears could intensify, capping any equity gains
  • Bond yields likely to decline

In-line report (40,000-70,000 jobs, unemployment near 4.6%):

  • Confirms "low-hire, low-fire" pattern without signaling crisis
  • Supports Fed's patient approach to rate cuts
  • Market reaction likely muted

Strong report (above 100,000 jobs or unemployment below 4.5%):

  • Would reduce rate cut expectations
  • Could boost equities on growth optimism
  • Bond yields likely to rise
  • Dollar would strengthen

The 2026 Labor Market Outlook

Looking beyond December, the early 2026 labor market faces several headwinds:

Seasonal patterns: January typically sees job losses due to post-holiday layoffs in retail and hospitality. JPMorgan projects payroll gains could fall to just 70,000 in January before recovering later in the year.

Tariff effects: As tariff costs pass through to consumers (according to JPMorgan, the absorption ratio could flip from 80% business/20% consumer to 20%/80%), reduced consumer spending could dampen hiring.

AI displacement: Goldman Sachs has warned of an "AI-driven layoff tsunami" as automation begins replacing roles in finance, customer service, and other white-collar sectors.

Policy uncertainty: With a new Fed chair expected in May and potential tax policy changes, businesses may remain cautious about adding headcount.

JPMorgan's baseline forecast sees unemployment peaking at 4.5-4.7% in early 2026 before conditions stabilize later in the year. The bank expects the "low-hire, low-fire" pattern to persist through at least the first half.

What It Means for Workers and Job Seekers

For Americans navigating the job market, the December report and 2025 trends offer practical guidance:

  • Expect longer job searches: The hiring slowdown means finding new positions takes more time than during the post-pandemic boom
  • Target growing sectors: Healthcare, government, and specialized technology roles (particularly AI-related) offer better prospects
  • Wage expectations: Rapid wage growth has moderated; expect increases closer to inflation rather than significantly above it
  • Skill development: In a slower market, additional certifications and capabilities can differentiate candidates

The Bottom Line

Friday's December employment report will close the book on what has been the weakest year for job creation since the financial crisis aftermath. The expected addition of approximately 55,000 jobs, while not recessionary, confirms that the labor market has shifted to a lower gear. For investors, the report will shape Fed policy expectations. For workers, it underscores the need to adapt to a more selective hiring environment. Either way, the "low-hire, low-fire" pattern that defined 2025 shows no signs of changing dramatically as 2026 begins.