At first glance, the report appears positive, and suggests the strength of the labor market in the USA at the end of 2025. However, looking at the reading itself, one can lose sight of nuances and trends:
- The change in non-farm employment (NFP) shows an increase of 50,000, which turned out to be below market expectations of 60,000, and it is a decline compared to the previous reading of 56,000. This reading is not inherently weak or tragic, but it is another decline in employment growth. For comparison, NFP readings from January (December) 2024 and 2023 oscillated around 200,000. This indicates a year-on-year employment decline in this indicator of 70%. These observations are confirmed in the BLS report. Employment increased by 584,000 throughout 2025 - however, in 2024, this increase was 2 million.
- Revisions of data are also significant. Data for October was revised downward by 68,000 jobs, and in November, it was 56,000. This means that the economy added over 100,000 fewer jobs than the market thought a month ago. It also indicates consistent overestimation of employment readings in preliminary data.
- Most focus on the relatively simple and universal unemployment indicator. The unemployment rate fell in December 2025 from 4.5% to 4.4%, which is supposed to indicate an improvement in labor market conditions. This observation is correct - but it overlooks an important detail. BLS uses a range of unemployment aggregates, with the official unemployment rate being the "U-4" aggregate, which includes the unemployed and "discouraged workers." The "U-6" aggregate, a broader measure including those forced into part-time work, rose to 8.7% in October and remains at 8.4% in December.
- The real "elephant in the room" of the American labor market remains all forms of temporary work, known as the "Gig-economy." According to readings, employment of this type increased by as much as 980,000 in 2025. However, this growth is not uniform, and as observed in the report - it is almost entirely concentrated in the second half of 2025. The phenomenon of temporary work also accounts for the relatively low number of unemployment benefits claims. The unemployment benefits system offers very little support, which is subject to a range of formal requirements that vary depending on state regulations. As a result, many people take up temporary/part-time work, completely bypassing the inefficient/lacking unemployment support system.
- Data supporting the thesis of a tightening labor market also include continuing claims for benefits. These again exceeded expectations and rose to 1.19 million. This, combined with decreasing initial jobless claims, means people who already managed to enroll into unemployment benefits support, stay unemployed for longer.
- The data that raises the most doubts are employment readings from the private sector. Growth in this sector is only 37,000 compared to the expected 64,000. This would mean that despite the government shutdown and mass layoffs of officials, the public sector was driving the labor market upward. However, this suspicion is not confirmed by the BLS report.
- Importantly, the problem of unemployment does not affect all social groups equally. Quite the opposite. The group with the highest unemployment rate is young people, where the rate is as high as 15.7% for teenagers and 10.4% for those aged 16-24.
- The sectors with the highest employment growth in December are retail and gastronomy. However, this does not indicate good health for these sectors, as they are also the industries that lost the most net jobs on an annual basis. More systematic growth can be boasted by the care and healthcare sectors.
- The consensus among analysts and commentators indicates that the labor market remains relatively strong, even though unemployment is the highest in almost 10 years (excluding the anomalous COVID pandemic period).
- Even these estimates do not reflect the real state due to the impact of part-time work, which provides income but does not allow for self-sufficiency.
- The situation of young people in the labor market, from bad, becomes dramatic.
- Employment trends reflect the ageing of the population in the USA. An increasing part of the economy is dedicated to caring for the elderly. Apart from investments in AI, recent contributions to GDP growth in the USA, are occupied increasingly by healthcare.
- The current path of interest rates in the USA does not take into account the real condition of the labor market. The manoeuvring room for the FED is becoming increasingly limited due to the pro-inflationary initiatives of the president's administration (such as tariffs) and the impact of artificial intelligence on the labor market.
US OPEN: Investors exercise caution in the face of uncertainty.
BREAKING: University of Michigan sentiment slightly better than expected!
BREAKING: Employment in Canada better than expected! 🍁📈
Economic calendar: US Non-Farm Payrolls and Supreme Court decision on tariffs in focus🗽
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