December 2025 Employment Situation Report: Modest Payroll Gains Amid Data Disruptions

Executive Summary

The December 2025 labor market showed continued softening in job creation alongside an elevated unemployment rate and slowing wage growth relative to historical norms. The most recent BLS Employment Situation indicates nonfarm payroll employment expanded modestly (+64,000), with an average of only tens of thousands of jobs added in late 2025 after a significant loss in October and a subdued rebound in November. The headline unemployment rate climbed to 4.6%, the highest in several years, reflecting a cooling labor market. Participation rates and underemployment metrics suggest persistent detachment among certain worker segments, while sectoral shifts show health care (+46,000) and construction (+28,000) as relative bright spots versus declines in federal government (-6,000) and transportation sectors. Taken together, the data point to a labor market transitioning from tight to more balanced conditions, with implications for consumption, wage pressure, and monetary policy.

Introduction

The December 2025 Employment Situation report is being released into a backdrop of macroeconomic uncertainty, delayed data collection due to a government shutdown, and evolving monetary policy expectations. The BLS Employment Situation typically integrates the household survey (for unemployment metrics) and the establishment survey (for payrolls, wages, and hours). However, the October 2025 data were not collected due to a prolonged federal funding lapse, causing the November report to include both October and November establishment results but not a standalone October household sample. Consequently, December data will be interpreted with caution around coverage gaps and potential survey timing artifacts.

Payroll Trends

Overall Job Creation

Total nonfarm payroll employment increased by 64,000 in November 2025, a modest gain that followed a substantial contraction in October and continued a pattern of subdued monthly job growth. Annualized and monthly context suggests that job creation in late 2025 was weaker than the multi‑hundred‑thousand averages seen earlier in the year and notably below long‑term post‑pandemic norms.

Private vs Public Sector Dynamics

Private sector drove gains with +69,000 jobs, led by service-producing industries (+50,000) and goods-producing (+19,000). Government employment declined by 5,000, primarily federal (-6,000), continuing October's sharp drop (-162,000 prior). This divergence highlights a bifurcation between parts of the private sector that remain resilient (e.g., health services) and public wage bill reductions that are exerting downward pressure on aggregate employment.

Unemployment Measures

Including U‑3 and U‑6 Rates

the official unemployment rate stood at 4.6 percent, up from earlier in the year and marking a multi‑year high relative to most of the post‑pandemic period (Financial times). Current official U‑6 data for November‑December are not yet published.

Labor Force Participation and Discouraged Workers

The labor force participation rate remained relatively unchanged in November at around 62.5 percent, and the employment‑population ratio held near 59.6 percent — both notably below pre‑pandemic peaks. The number of persons employed part time for economic reasons rose, suggesting a cohort working fewer hours than desired. This metric is key to interpreting the labor market beyond headline unemployment, as it captures underemployment and workforce attachment issues

Wage Dynamics and Workforce Composition

Average Hourly and Weekly Earnings

In November 2025, average hourly earnings for all employees on private nonfarm payrolls increased by a modest 0.1 percent month‑over‑month, translating to roughly 3.5% YOY growth — slower than mid‑2024 and early 2025 trends. Weekly earnings trends typically mirror hourly gains and hours worked; with the average workweek only marginally increasing, real wage growth (after inflation) likely remained constrained.

Employment Quality

Average weekly hours in manufacturing held at 40.0 (overtime unchanged at 2.9 hours). Full-time vs. part-time breakdowns unavailable in this release, but rising involuntary part-time (5.5 million) signals quality concerns amid selective hiring. BLS also notes 8.716 million multiple jobholders, representing 5.4% of the employed, indicating that a significant share of workers are supplementing income through additional jobs—highlighting underlying labor market pressure despite headline employment gains. Combined with elevated unemployment and stagnant wage acceleration, these dynamics suggest softening labor market conditions even as payrolls appear positive.

Sectoral Shifts

Industries with notable increases included healthcare (+46,000, distributed across ambulatory services +24,000, hospitals +11,000, and nursing/residential care +11,000) and construction (+28,000, primarily nonresidential specialty trade contractors +19,000). Social assistance added +18,000 (individual/family services +13,000).

Declines occurred in transportation/warehousing (-18,000, couriers/messengers -18,000) and federal government (-6,000). Mining/logging (-4,000) and manufacturing (-5,000) showed minor losses; other sectors like retail, leisure/hospitality, and professional services little changed.

Data Revisions and Reliability

August 2025 revised down by 22,000 (to -26,000); September down by 11,000 (to +108,000); combined 33,000 lower than previously reported, softening the prior trend.

Household survey response rate fell to 64.0% (below average), elevating standard errors and reducing reliability for unemployment/participation metrics. Establishment survey extended collection mitigated some bias, but shutdown-induced gaps (no October household data) complicate paradoxes like stable payrolls amid potential hidden slack. Sampling may undercapture detached workers.

Implications and Insights

December 2025 labor data signal a cooling labor market with modest payroll gains (+64,000 in November, below consensus of 100,000–150,000), rising unemployment, and slower wage growth. Sectoral strength in health care, construction, and social assistance contrasts with weakness in federal government and discretionary sectors, reflecting uneven demand across industries. Persistently elevated part-time work and underemployment highlight continued labor underutilization, potentially constraining household income and discretionary spending in early 2026.

Employers should focus on flexible staffing, retention in high-demand roles, and productivity improvements rather than broad expansion, while workers may benefit from reskilling in resilient sectors. Policymakers should consider targeted interventions, including workforce development and support for displaced employees, to address structural labor frictions. Given data collection disruptions and revisions, analysts should integrate high-frequency indicators alongside official statistics to anticipate trends.

Overall, the labor market is moderating but not collapsing. Modest gains in resilient sectors combined with public sector cuts suggest a labor market losing steam but avoiding sharp deterioration, supporting continued Fed caution on rate cuts. Businesses and policymakers should prioritize strategic monitoring, sector-specific workforce planning, and targeted policy measures to manage risk and capture opportunities in a gradually cooling economy.

Conclusion

The December 2025 Employment Situation points to a labor market that is no longer overheating but instead weakening modestly. Sluggish job creation, rising unemployment, and slowing wage growth reflect broader economic headwinds and structural shifts in workforce dynamics. While sectors like health care and construction continue to add jobs, overall market softness suggests caution for policymakers and investors alike. Continued monitoring of refined December figures and early 2026 data will be essential to validate emerging labor trends.