US Job Market Sees Slowdown in December
The US job market experienced a slowdown in December, with the creation of 50,000 new jobs, which is lower than the expected 60,000 jobs. This slowdown is attributed to business caution in hiring due to import tariffs and rising artificial intelligence investment. Despite this, the unemployment rate dipped to 4.4%, which is lower than the forecasted 4.5%.
Labor Market Analysis
The labor market has been stuck in a "no hire, no fire" mode, with economic growth and worker productivity surging in the third quarter due to the AI spending boom. However, the labor market lost momentum last year, largely due to President Donald Trump’s aggressive trade and immigration policies, which reduced both demand for and supply of workers.
Job Growth Moderation
The sharp moderation in job growth started in 2024, with the Bureau of Labor Statistics (BLS) estimating that about 911,000 fewer jobs were created in the 12 months through March 2025 than previously reported. The BLS has also announced changes to the birth-death model, which is used to estimate job gains or losses due to companies opening or closing.
Unemployment Rate Revision
The annual revisions to the household survey data for the past five years were published, and the unemployment rate was revised down to 4.5% from 4.6% in November. The median forecast was for the jobless rate to have eased to 4.5% in December. Economists believe that low supply has prevented a sharp rise in the unemployment rate, estimating that between 50,000 and 120,000 jobs need to be created each month to keep up with growth in the working-age population.
Impact on Interest Rates
The US central bank cut its benchmark interest rate by a quarter of a percentage point to the 3.50%-3.75% range in December, but officials indicated that they were likely to pause further reductions in borrowing costs for now. This is because factors like tariffs and AI are preventing companies from hiring more workers, making the labor market’s challenges more structural than cyclical.
Conclusion
In conclusion, the US job market saw a slowdown in December, with the creation of 50,000 new jobs and an unemployment rate of 4.4%. The labor market has been stuck in a "no hire, no fire" mode, with economic growth and worker productivity surging due to the AI spending boom. The US central bank is likely to pause further reductions in borrowing costs, as the labor market’s challenges are more structural than cyclical. As the job market continues to evolve, it will be important to monitor the impact of tariffs and AI on hiring and the overall economy.
