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**The Labor Market: Softening or Stabilizing?**
The latest data from the Bureau of Labor Statistics for December 2025 revealed minimal month-over-month changes in both non-farm payroll employment, which increased by 50,000 jobs, and the national unemployment rate, which held steady at 4.4%.
A recent report from Marcus & Millichap noted that average monthly job growth in 2025 was approximately 49,000—significantly lower than the 167,000 average monthly increase observed in 2024. Despite the slowdown, the combination of employment levels and unemployment rates continues to suggest a labor market that remains broadly balanced, rather than facing a downturn.
Further reinforcing this outlook, the year-end report from Challenger, Gray & Christmas highlighted that the final month of 2025 recorded the fewest announced layoffs of any month that year. Andy Challenger described this as a positive development, particularly after a year marked by elevated levels of planned job cuts.
Marcus & Millichap pointed out that job gains persisted within service industries, especially sectors less impacted by tariffs. Productivity and wages both increased over the year. However, worker confidence in securing new employment declined. The December data also underscored a significant divergence, with goods-producing industries lagging behind while trade-insulated service sectors held steady or expanded.
Against the backdrop of elevated inflation—still above the Federal Reserve’s 2% target—and ongoing economic volatility, the Federal Open Market Committee (FOMC) opted to leave the federal funds rate unchanged at a range of 3.5% to 3.75%. The Fed noted it would continue to monitor economic conditions closely.
Marcus & Millichap analysts emphasized that sustained wage growth could contribute to stubbornly high inflation within the service sector. Coupled with potential price pressures from tariffs, these factors are likely to influence the Fed’s cautious stance on any near-term interest rate cuts.
While questions remain around the trajectory of the U.S. labor market, recent indicators seem to tilt the narrative more toward stabilization than softening.
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