Last December, the U.S. labor market most likely showed a modest growth trend, a performance that may provide investors with a bit of confidence for the new year, but is not sufficient to trigger excessive market enthusiasm. The U.S. Bureau of Labor Statistics will release this report at 9:30 PM Beijing time on Friday.
According to market consensus forecasts, U.S. non-farm employment may increase by 60,000 in December, with the unemployment rate slightly declining to 4.5%. However, the forecast range for new employment numbers spans from 25,000 to 155,000, highlighting the uncertainty in the current hiring environment.
If the above consensus forecast is basically accurate, this new employment data will see a slight increase compared to the average monthly increase of 55,000 people over the first 11 months of 2025, and will also be slightly higher than the preliminary 64,000 people reported in November. The current unemployment rate is 0.5 percentage points higher than at the beginning of 2025.
For traders, this report has important implications for expectations of Federal Reserve policy and could drive substantial volatility across equities, bonds, FX, and precious metals. If the nonfarm employment data are weak, it would further reinforce market expectations that the Fed will increase the pace of rate cuts later this year. As a result, the U.S. dollar is likely to weaken, while U.S. stocks may first see a rebound; thereafter, concerns about economic growth could take the lead in driving sentiment.
Conversely, if the nonfarm data come in strong, it would reduce the market’s rate-cut bets and provide support for the dollar’s exchange rate. At the same time, it could weigh on valuation for U.S. stocks. A stronger dollar is also bad for gold, which is already operating under the shadow of index rebalancing. As independent analyst Ross Norman put it: “The gold price has recently fallen due to profit-taking, but another key driver is that the dollar strengthened ahead of the nonfarm employment data release.”
It is important to note that this nonfarm report, to be released on Friday, will be the first timely employment report since the U.S. government shutdown ended in mid-November. The data gap caused by the shutdown has raised many questions. Some economists expect that the first “clean” report for the U.S. labor market will not be available until February 2026.
Data breakdown
An expected 60,000 new jobs, significantly slower than historical normal levels. During most of the post-pandemic recovery phase, the U.S. monthly average for new jobs has far exceeded 200,000; compared with that, the current expected figure looks particularly lackluster.
As for the U.S. unemployment rate edging down slightly from 4.6% to an expected 4.5%, this seemingly positive change stands in sharp contrast to the weak outlook for new jobs. The root cause of this divergence in the data lies in differences in statistical definitions: new jobs data from nonfarm employment come from surveys of employers, while unemployment rate data come from household sampling surveys.
In addition, the data distortion caused by the earlier U.S. government shutdown may not yet have fully faded. This makes month-over-month comparisons of monthly employment data more difficult than usual. It is important to be alert to the risk that if the unemployment rate is falling driven by a decline in the labor force participation rate, then this indicator cannot truly reflect the strength of the labor market.
Average hourly earnings data will also become a focus for the market. If companies slow hiring while wage growth accelerates, it would create a policy dilemma for the Fed—an environment where weak economic growth coexists with elevated inflationary pressure would significantly increase the difficulty for policymakers.
Forward-looking indicators release warning signals
A report on last November’s job openings and labor turnover (JOLTS) released earlier this week showed that the number of job openings in the United States fell sharply. Job openings are often seen as a leading indicator of future employer hiring intentions. When fewer job postings are released, it usually means companies’ confidence is weakening. It also suggests that the growth pace of new nonfarm employment could further slow.
The decline in job openings further supports the view that the weak outlook for December’s new jobs is not just a random statistical fluctuation, but a true reflection of weakening labor demand—and this trend may persist for several months.
At the same time, the U.S. labor quit rate has also been trending steadily downward. When the number of workers who voluntarily leave their jobs falls, it often means employees lack confidence in external job opportunities—another important signal that the labor market is gradually cooling.
Data revisions matter more
Experienced traders know that revisions to the first two months of new employment data in the nonfarm report can materially change the market’s assessment of labor market strength. Even if December’s nonfarm new jobs data are roughly in line with expectations, if the prior value is revised upward or—more importantly—revised down significantly, concerns about weakening hiring momentum will rise sharply.
In its recent jobs report, the U.S. Bureau of Labor Statistics made fairly significant revisions to historical data. If the October and November new jobs figures are revised downward, then the true state of the U.S. labor market would look even more severe than the picture suggested by the initial month-a-month employment growth figure for December.
Historical experience shows that when the initial nonfarm print and the revised figures send conflicting signals, financial markets often experience sharp volatility. For example, if December’s nonfarm data are better than expected but the prior value is revised down significantly, the market will be strongly divided, leading to a choppy pattern in asset prices.
Stabilization in the U.S. job market in 2026
Looking ahead to 2026, most economists believe that even if the U.S. labor market is unlikely to deliver strong performance, it will at least continue to function steadily.
“By the end of 2025, the job market is much stronger than it was at the start of the year.” Amy Glaser, senior vice president of business operations at Adecco Staffing, said, “We’ve already seen some positive signals—both in hiring activity and in the slowdown in layoffs. So looking ahead to 2026, the employment outlook is quite optimistic. I think it will be a year when the job market stabilizes.”
Throughout most of 2025, the U.S. job market’s fluctuations remained within a relatively narrow range. April’s new jobs reached a peak of 158,000, while October recorded a decrease of 105,000 in employment. In the last six months of 2025, three months saw a net outflow of employed people.
“What we’re seeing is that the job market is neither overly sluggish nor overheated—it’s in a moderate range.” Glaser said. “I think the job market in 2026 will continue along this path. Market participants are generally cautiously optimistic. There may be some ups and downs along the way, and the process won’t be perfectly smooth, but in the end, the resilience of the job market has been validated.”
Even so, some Fed policymakers worry that the labor market has developed cracks, and that these cracks could widen further in 2026.
Supporters of the Federal Reserve’s recent three consecutive rate cuts said the need to support employment prospects has surpassed concerns that inflation could return. Fed officials also noted there is a problem of “systematic overestimation” in nonfarm employment growth, which is one of the reasons they remain cautious.
Jose Torres, a senior economist at Interactive Brokers, said the market has long been hoping that the Federal Reserve will step in again if necessary.
“Market confidence improved somewhat in 2025, because investors expect the Federal Reserve to further ease monetary policy,” he said. “That expectation will strongly support hiring activity in more cyclical sectors.”
So far, job growth has been concentrated in areas benefiting from expansionary fiscal policy—especially healthcare and government sectors. Glasser expects this trend to continue into 2026.
Glaser also said that, in addition to the trends mentioned above, another focus in the U.S. job market in 2026 worth monitoring is companies’ employee retention strategies—namely, firms are more inclined to keep existing employees rather than lay them off or conduct large-scale hiring.
“Employers now place a lot of value on employees who stick with their jobs. They give them raises, additional bonuses, and more benefits.” She added, “Well-run employers are doing one thing: investing in employees’ skill development and retraining.”