US labor market remains strong, adding 256,000 jobs in December

The U.S. labor market is showing signs of cooling but remains in good health. The world’s largest economy has posted 48 consecutive months of job creation, with the latest figures showing a gain of 256,000 jobs in December, according to data released Friday by the Bureau of Labor Statistics, well above expectations. This brings the total number of jobs created in 2025 to around two million, and the unemployment rate stands at 4.1%. Economists had expected about 155,000 jobs to be created and the unemployment rate to remain at 4.2%, the same as the previous month.

While the labor market remains strong, the U.S. economy is still navigating its soft landing: bringing inflation down to 2% without triggering significant job losses or plunging into a full-blown recession. Substantial progress has been made, but the final phase of the inflation battle is proving to be protracted, and the labor market is showing signs of softening.

The Federal Reserve’s roadmap has become more complicated in recent months. In response to cooling labor market conditions, the central bank has embarked on a cycle of interest rate cuts, reducing the federal funds rate by 0.5 percentage points in September and by 0.25 percentage points in both November and December. However, the likelihood of further rate cuts this year has diminished, as inflation has not yet lost its upward momentum.

At their December meeting, Federal Reserve officials signaled that they expect only a modest 0.5 percentage point rate cut later this year. Minutes from the Federal Open Market Committee (FOMC) meeting, released Wednesday, suggested that the Fed is likely to pause rate cuts at its next meeting on January 28-29, marking the first such meeting under Donald Trump’s second term as president.

“Many participants suggested that a variety of factors underlined the need for a careful approach to monetary policy decisions over coming quarters,” the minutes stated. “These factors included recent elevated inflation readings, the continuing strength of spending, reduced downside risks to the outlook for the labor market and economic activity, and increased upside risks to the outlook for inflation.”

Trump’s own policies, particularly his frequent threats of tariffs, have added another layer of uncertainty. As a result, monetary policymakers are taking a “wait and see” approach. They are monitoring the labor market’s performance, tracking inflation, and assessing how the incoming president’s policies and the actions of a Republican-majority Congress will unfold.

Federal Reserve Governor Michelle Bowman expressed caution in a speech on Thursday. ”I expect that the coming months should bring clarity on the incoming administration’s policies and the carry over of inflationary pressures from 2024,” she said. “It will be very important to understand how these factors will affect economic activity and inflation going forward.”

Kansas City Fed President Jeff Schmid, however, struck a more optimistic tone. “My read of the data is that we are currently pretty close to meeting our dual mandate of price stability and full employment,” he stated.

Debt markets are signaling some concerns about inflationary risks and the possibility that tight monetary policies may persist for longer. In the secondary market, the yield on 10-year Treasury securities recently surged above 5%. Meanwhile, in the fed funds futures markets, the official price of money is expected to remain in the 4.25%-4.5% range through the upcoming Federal Reserve meeting at the end of January, according to CME’s FedWatch tool. The tool also suggests it is most likely that the rate will stay unchanged at the March 18-19 meeting.

Sign up for our weekly newsletter to get more English-language news coverage from EL PAÍS USA Edition