Mixed jobs report leaves Fed on track for January hold

• Job growth of 50,000 in December missed economist estimates of 70,000, signaling continued cooling in the labor market
• Unemployment rate dropped to 4.4% despite weak payrolls, with labor force participation holding steady at 62.4% and employment-population ratio unchanged at 59.7%
• Analysts view the report as confirming a January rate hold is highly unlikely to change, though Wells Fargo maintains a base case for 'a couple more rate cuts' later in 2026

Summary: December Jobs Report Signals Fed to Hold Rates in January

The U.S. economy added 50,000 jobs in December, falling short of the 70,000 median economist forecast, according to Labor Department data released Friday. Despite the weak payroll growth, the unemployment rate improved to 4.4% from November's 4.6%, beating expectations of 4.5%.

Key Labor Market Metrics:

• Unemployed persons: 7.5 million (roughly unchanged month-over-month)
• Labor force participation rate: 62.4% (unchanged)
• Employment-population ratio: 59.7% (stable throughout 2025)

Market Implications:

The mixed report presents both dovish and hawkish signals. XTB Research Director Kathleen Brooks noted the data confirms the U.S. remains in a "low hire and low fire environment," with the labor market narrative unchanged. Critically, the report makes a January rate cut "highly unlikely" at the Federal Reserve's January 28 meeting.

Wells Fargo analysts concurred that the Fed will likely hold rates steady, stating the labor market cooling appears "orderly and gradual." However, they maintain their base case of "a couple more rate cuts this year," citing unemployment above full employment levels, slowly cooling inflation, and policy rates above neutral.

Outlook:

The consensus among analysts is that the Federal Reserve will pause rate adjustments in January while maintaining flexibility for potential cuts later in 2026. The gradual labor market deceleration supports a patient approach to monetary policy rather than immediate action.