US job growth slows amid AI boom and tariff caution, Fed likely to hold rates steady
Structural shifts from AI and trade policies limit hiring to 50,000 in December, reinforcing bets that the central bank will hold rates steady
US job growth slowed more than expected in December amid business caution about hiring because of import tariffs and rising artificial intelligence investment, but the unemployment rate dipped to 4.4 per cent, supporting expectations the Federal Reserve would leave interest rates unchanged this month.
Nonfarm payrolls increased by 50,000 jobs last month after rising by a downwardly revised 56,000 in November, the Labor Department’s Bureau of Labor Statistics (BLS) said on Friday. Economists polled by Reuters had forecast 60,000 jobs added after a previously reported 64,000 increase in November.
The closely watched employment report suggested the labour market remained stuck in what economists and policymakers have called a “no hire, no fire” mode. It also confirmed the economy was in a jobless expansion. Economic growth and worker productivity surged in the third quarter, in part attributed to the AI spending boom.
The labour market lost considerable momentum last year, largely blamed on US President Donald Trump’s aggressive trade and immigration policies, which economists and policymakers said reduced both demand for and supply of workers.
The sharp moderation in job growth, however, started in 2024. The BLS has estimated about 911,000 fewer jobs were created in the 12 months through March 2025 than previously reported. The agency will publish its payrolls benchmark revision next month with the January employment report.
The overcounting has been blamed on the birth-death model, which is used by the BLS to estimate how many jobs were gained or lost because of companies opening or closing in a given month. Last month, the BLS said it would, starting in January, change the birth-death model by incorporating current sample information each month.