Slower US job growth expected in December; unemployment rate likely dipped

U.S. job growth likely slowed in December amid business caution about hiring because of import tariffs and rising artificial intelligence investment, though an anticipated easing in the unemployment rate to 4.5% could support expectations the Federal Reserve will leave interest rates unchanged this month.

The Labor Department’s closely watched employment report on Friday is expected to show the labor market remained stuck in what economists and policymakers have called a ”no hire, no fire” mode. It would also confirm 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.

”It’s not so much weak demand because the economy seems to be doing not bad, but businesses are very cautious about taking on new workers,” said Sal Guatieri, a senior economist at BMO Capital Markets. ”That’s possibly related to the desire to keep costs under control, perhaps in the face of tariffs, but also because many businesses believe there will be some productivity payoff from AI-driven automation.”

Nonfarm payrolls probably increased by 60,000 jobs last month after rebounding by 64,000 in November, a Reuters survey of economists estimated. The economy lost 105,000 jobs in October, the largest decrease in nearly five years, mostly federal government employees who took deferred buyouts. They received their last paycheck at the end of September.

Economists estimate that between 50,000 and 120,000 jobs need to be created each month to keep up with growth in the working-age population. The labor market lost considerable momentum last year, with well-below one million jobs estimated to have been added. Roughly 2 million jobs were created in 2024, though this number could be revised lower when the Bureau of Labor Statistics publishes its payrolls benchmark revision next month with the January employment report.

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Source: Reuters