Forecasts for December Jobs Report Show Moderate Hiring Slowdown

Key Takeaways

• Official labor market data released this week is expected to show a slowdown in the job market.
• Slowdowns in small business hiring have dragged down the economy.
• Economists say the Fed is unlikely to cut rates at its January meeting.

Forecasts for the December nonfarm payrolls report indicate that the US labor market continued to add jobs, though at a slower pace than the previous month. The unemployment rate is expected to tick down.

Nonfarm payroll employment is projected to have risen by 55,000 in December, down from 64,000 in November, according to consensus estimates from FactSet. The unemployment rate is expected to lower to 4.5% in December from 4.6% the previous month.

“Job growth should remain steady,” says Blerina Uruçi, chief US economist at T. Rowe Price. She predicts the labor market to add 60,000-70,000 jobs in December, slightly above the consensus estimate.

José Torres, senior economist at Interactive Brokers, is even more optimistic, predicting 100,000 jobs to be added. “It looks like there’s been more of an appetite for hiring,” he explains. “There is increased confidence that [the Federal Reserve] is going to cut [interest rates] a few times in 2026, and that’s really helping the rate-sensitive areas.” Later in the year, Torres expects improvements for small business, construction, and manufacturing jobs, owing to rate cuts.

December Jobs Report Forecast Highlights

• Job report release date and time: Friday, Jan. 9, at 8:30 a.m. EDT
• Nonfarm payroll employment is forecast rise by 55,000 versus the 64,000 rise in November, according to FactSet.
• The unemployment rate is forecast to rise to 4.5% from 4.6% in November.
• Hourly earnings are projected to rise 0.1% on a monthly basis, matching the November rise.

The Economy’s Outlook Hinges on Small Businesses

Lately, there has been a divergence in hiring behavior between small and large businesses. “Over the last year, small companies have been shedding workers and larger companies have been increasing employmen,” explains T. Rowe Price’s Uruçi, who says this difference in hiring was caused by trade uncertainty in 2025. She’s looking for signs of a shifting dynamic, noting that an increase in small-business hiring “would make for a positive outlook for the broader economy next year.”

While Torres expects healthcare to continue to lead job growth, he adds that the potential recovery of small businesses in 2026 depends on further rate cuts from the Federal Reserve. “Small businesses have just consistently been a drag,” he says. “But lower interest rates are going to help those areas start to do better.”

Unemployment Rate to Remain Steady

Torres expects the unemployment rate to be steady in December but remain elevated —or even rise further—this year: “For the unemployment rate to go even slightly lower, we would really need hiring to pick up significantly, and I just don’t see that in the cards.”

Bank of America economists predict a small reduction in the unemployment rate, citing fewer permanent layoffs and temporary job completions. “We expect to see a partial reversal, with the unemployment rate likely ticking lower to 4.5% in December,” they wrote.

This view is shared by Goldman Sachs economists, who noted that the increase of the unemployment rate to 4.6% in November “largely reflected the impact of furloughed federal government workers during the shutdown.”

What’s Next for the Fed?

In the immediate term, the Fed is likely to maintain its interest rate target range of 3.50%-3.75%. Nearly 90% of futures market participants expect no change at the Fed’s January meeting, while 11% expect a quarter-point cut, according to the CME FedWatch tool. The most recent Fed minutes suggested a rate cut in January is unlikely.

T. Rowe Price’s Uruçi anticipates little action from the Fed in the first half of the year. “The Fed had already cut interest rates by 75 basis points by the end of last year, and with the inflation outlook still uncertain, they’re likely going to pause to see the effect on the economy from the cuts they already delivered.”

Bank of America economists believe a cut is unlikely, but it will depend on the unemployment rate. “A print of 4.5% or lower should keep the Fed comfortably on hold, while 4.7% or higher would point to further labor deterioration and probably precipitate a cut. 4.6% is a close call,” says Bank of America economist Shruti Mishra. “For now, our base case remains that the Fed will not cut again under Powell.”