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Unemployment and job growth came in pretty much in line with expectations. The unemployment rate edged down to 4.4 percent, which was a drop of 0.1 percentage points from the November rate. (November’s rate was lowered by 0.1 p.p. from the previously reported 4.6 percent, due to new seasonal adjustment factors.)

The job growth figure was largely in line with expectations, but the prior two months’ data were revised downward. With the revisions, the average for the last three months was a fall of 22,000. The health care and social assistance sector added an average of 49,000 jobs over this period, which means that outside of health care the economy lost an average of 71,000 jobs in the last three months.

It is also worth noting that the establishment survey may be overstating job growth. There is likely to be a large benchmark revision to the data next month with the January jobs report. While that applies to the jobs numbers through March of last year, it is likely that the same factors causing an overstatement in job growth are still there. Fed chair Jerome Powell recently speculated that the overstatement is around 60,000 a month.

Involuntary Part-Time Remains High

While the modest decline in the unemployment rate was encouraging, much of the other data in the household survey was less positive. There was a jump of almost 900,000 in November (compared to September) in the number of people who reported they were working part-time but wanted full-time work. These data are erratic, so it was possible the rise would be largely or completely reversed in the December report. There was a modest decline of 146,000, but the December figure is still 980,000 above the year-ago level. Interestingly, the number of people choosing to work part-time is down by 371,000 from last December.

Prime-Age Women (ages 25-54) Face Difficult Job Market

The unemployment rate for prime-age workers stood at 3.7 percent in December, 0.6 p.p. above its average for 2019 before the pandemic. This is mostly a story of higher unemployment for prime-age women. The unemployment rate for prime-age men was 3.5 percent in December, 0.5 p.p. above its 2019 average. For prime-age women it was 3.9 percent, 0.8 p.p. above its 2019 average.

Despite the higher unemployment rate, the labor force participation rate for prime-age women stood at 78.1 percent, 2.1 p.p. above its 2019 average. For men, it was 89.5 percent, just 0.4 p.p. above its 2019 average. Clearly more women are feeling the need to work even in a more difficult labor market.

Share of Long-Term Unemployment Jumps to 26.0 Percent

The share of the unemployed who have been out of work for more than 26 weeks rose to 26.0 percent in December, the highest share since February of 2022. By comparison, in the strong labor market of 2019, the share of long-term unemployed was close to 21 percent.

In the same vein, the share of unemployment due to voluntary quits remained low at 11.1 percent. It averaged 13.2 percent in the strong 2018-19 labor market.

Unemployment Rate for Black Workers Falls to 7.6 Percent

There has been a sharp rise in the unemployment rate for Black workers in 2025, even as the unemployment rate for whites changed little. The reported rate dipped somewhat from the 8.2 percent November rate (reported as 8.3 percent last month, before new seasonal adjustment factors). This is still up 1.4 p.p. from the year-ago rate, and 2.8 p.p. from the recovery low, but suggests the jump reported for November may have been an aberration. By comparison, the unemployment rate for white workers was 3.8 percent, just 0.2 p.p. above the year-ago level.

Young Workers and College Grads Still Seeing a Weak Labor Market

The unemployment rate for workers between the ages of 20-24 fell slightly to 8.2 percent, but that is still 0.7 p.p. above the year-ago level and 2.7 p.p. above the 5.5 percent recovery low. For college grads the unemployment rate was 2.8 percent in December. While that is well below the overall unemployment rate, it is 0.3 p.p. above its year-ago level. By contrast, for workers with just a high school degree, the 4.0 unemployment rate is 0.4 p.p. below its year-ago level.  

Unemployment Rate for Native-Born Workers is 0.4 p.p. Above Year-Ago Level

As many of us have pointed out, the employment levels for native-born workers are meaningless, given the way the data are constructed. However, the percentages do tell us about labor market conditions. The 4.1 percent rate for native-born workers is 0.4 p.p. above the year-ago level.

Goods Sector Continues to Lose Jobs

All three components of the goods sector lost jobs in December. Mining and logging lost 2k jobs, construction lost 11,000, and manufacturing lost 8k. Over the year, mining and logging is down by 16k and manufacturing is down by 68k. Construction is up by 14k since last December.

Most of the job loss in mining has been in the oil and gas industry, as low prices have discouraged drilling. If prices stay at current levels, or fall lower, job loss will continue.

Restaurants Add 27,000 Jobs in December

The restaurant sector has been the only consistent source of strong job growth outside of health care. It has added an average of 28,200 jobs over the last three months. Local governments have added an average of 12,700 jobs over this period, but state governments lost on average 6,300.

Wage Growth Edges Higher

Year-over-year wage growth was 3.8 percent in December. This is up from the 3.5 percent rate reported for November, but still down from the 4.0 percent rate for most of 2023 and 2024.

The index of aggregate hours fell by 0.3 percent in December. For the quarter, it grew at just a 0.4 percent annual rate. This implies a very strong productivity growth figure for the quarter, following a strong third quarter. These data are erratic and subject to large revisions, but these growth numbers are striking.

Overall Picture: Gradual Weakening

This is not a bad report; the modest drop in the unemployment rate has to be seen as good news, as well as the evidence of some pickup in wage growth. However, employment growth has slowed to a crawl and the rise in involuntary part-time, as well as long-term unemployment, must be seen as evidence of labor market distress.

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