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The December jobs report came in lighter than expected, but a lower unemployment rate is likely to encourage the Federal Reserve to keep interest rates unchanged when it meets later this month. Still, market participants are hopeful for at least two rate cuts this year.
According to the Bureau of Labor Statistics (BLS), nonfarm payrolls rose by 50,000 in December, falling short of economists’ estimates for the creation of roughly 55,000 new jobs.
The figures for October were revised down by 68,000, from -105,000 to -173,000, while jobs growth for November was lowered by 8,000, from +64,000 to +56,000. The revisions resulted in a combined 76,000 fewer jobs over those two months than previously reported.
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As for December, job gains were seen in health care (adding 21,000) and food services and drinking places (adding 27,000). Federal government jobs increased by 2,000 in December, but declined by 277,000, or 9.2%, throughout the year.
The unemployment rate, which is calculated from a separate survey, fell to 4.4% from 4.6% in November. The data also showed that wage growth was 0.3% higher compared to November and up 3.8% year over year.
“The December jobs release provided the first clean read on the labor market since the government shutdown ended, but did little to provide clarity about the state of the labor market given its mixed reading,” says Jeff Schulze, head of economic and market strategy at ClearBridge Investments.
On one hand, notes Schulze, the falling unemployment rate eases some concerns over labor market weakness. But the negative revisions “revealed fewer jobs created than previously believed with private payrolls bearing the brunt of the downgrade.”
Schulze believes this should keep the Fed on hold for now, but today’s report “keeps hopes alive for further monetary policy accommodation later in 2026.”
According to CME Group’s FedWatch, futures traders are now pricing in a 95% chance the Fed will keep the federal funds rate unchanged when it meets in January, up from 89% one day ago. Betting odds are for the first quarter-point rate cut of 2026 to come in June, with at least one more anticipated by year’s end.
With the December jobs report now in the books, here’s some of what economists, strategists and other experts around Wall Street have to say about the results and what they could mean for the Fed and investors going forward.
Experts’ takes on the December jobs report and what it means for the Fed
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“At first glance, this is a really positive report — the unemployment rate dropped down to 4.4% and the average hourly earnings jumped up to 3.8%, however, it will be easy for the skeptics to point out a very meager increase of 50k in jobs. In essence, we are seeing validation of the idea that job creation is very weak and companies have been letting workers go at a slow pace. There aren’t any red flashing lights indicating an imminent recession, but there are plenty of yellow warning lights flashing and there is the risk that we could approach stall speed.” – Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management
“The decline in the jobless rate reinforced expectations for the Federal Reserve to leave policy unchanged at its January meeting. Considering the body of data we’ve observed in recent weeks, we think the labor market stabilized late last year, and the U.S. economy exited 2025 on firm footing. We continue to look toward positive policy and economic tailwinds that we think will spur a reacceleration in economic growth in 2026. We still expect two more quarter-point Fed rate cuts, likely in the first half of this year.” – Jennifer Timmerman, Senior Investment Strategy Analyst at Wells Fargo Investment Institute
“Today’s report confirms what we think has been evident for some time — the labor market is no longer working in favor of job seekers. Until the data provide a clearer direction, a divided Fed is likely to stay that way. Lower rates are likely coming this year, but the markets may have to be patient.” – Ellen Zentner, Chief Economic Strategist for Morgan Stanley Wealth Management
“The December jobs report returned to its regular schedule and delivered plenty for markets to digest. On the surface, this paints a picture of continued labor market resilience, with wages keeping pace with inflation, something market bulls will welcome. Underlying sector dynamics will be important to consider going forward. More sectors are starting to slow alongside manufacturing, while health care continues to show strength. Risk-on sentiment remains intact for now in portfolios, but the data effectively removes any chance of a January Fed rate cut.” – Lara Castleton, US Head of Portfolio Construction and Strategy at Janus Henderson Investors
“The good news is that the economy only needs 50K jobs/month to keep the labor market stable — the better news is that incomes are up and growing. Lower rates are coming from the Federal Reserve.” – Jamie Cox, Managing Partner for Harris Financial Group
“For markets, the immediate takeaway is broadly supportive for risk assets. Softer jobs data reduces the likelihood of further rate hikes and keeps expectations tilted toward eventual easing later in the year. Equities may find support from the idea that growth is slowing in an orderly way, while bond yields could remain under pressure as investors price in a more accommodative Fed. At the same time, the U.S. dollar may struggle to extend gains if rate expectations continue to shift lower.” – Daniela Hathorn, Senior Market Analyst at Capital.com