December Jobs Report: Healthcare Masks a Flatlining Labor Market
December Jobs Report: Healthcare Masks a Flatlining Labor Market
The December Employment Report caps off a historically weak year for the labor market, with the economy adding a meager 50,000 jobs, barely enough to keep pace with population growth. With only 584,000 net jobs added across all of 2025, the labor market has deteriorated dramatically from 2024's 2.0 million job gain, representing a 71% year-over-year decline in job creation. Aside from 2020, this is the lowest annual job growth since 2009.
The uniqueness of last year's labor market is evident in one stat: Healthcare alone accounted for roughly 69% of all job growth across 2025. The reliance on a single industry to keep job growth positive uncovers the unstable foundation in play going into 2026. Economic uncertainty (tariffs, inflation, geopolitical tensions, etc.) is rocking business decisions and undercutting the effectiveness of the Fed's recent rate cuts. Despite policy efforts to strengthen the labor market through job creation, progress remains absent, with both job growth and job openings continuing to be subdued.
Sectoral Breakdown
Healthcare (+408,000 estimated annual jobs) drove nearly all growth.
Food Services and Drinking Places (+144,000 estimated) provided modest support.
Retail Trade showed little net change for the second consecutive year.
Federal Government saw a loss of 277,000 jobs across the year, adding to the overall labor market weakness.
Outside healthcare, the labor market has essentially flatlined, painting a picture of broad-based weakness masked only by continued demand for medical services, a structural necessity for an aging population rather than a sign of economic vitality.
The Unemployment Report
The unemployment rate held at 4.4% in December, down from November's revised 4.5% but still elevated from the year's beginning. While this represents a slight improvement from the government shutdown-induced peak earlier in the fall, the underlying labor market conditions remain concerning:
The number of unemployed individuals stands at 7.5 million.
Long-term unemployment (27+ weeks) now affects 1.9 million workers, up 397,000 over the year, a 26% increase that signals deep structural challenges in matching available workers with open positions.
The long-term unemployed now represent 26.0% of all unemployed people, up from 24.3% in November, indicating unemployment is increasingly becoming a permanent state rather than a temporary transition.
A troubling trend has accelerated: the number of people employed part-time for economic reasons surged to 5.3 million, up 980,000 over the year. These workers would prefer full-time positions but have been forced into part-time arrangements due to reduced hours or inability to find full-time work. This 23% annual increase suggests employers are increasingly reluctant to commit to full-time hiring even as they maintain some level of staffing.
The number of people not in the labor force who currently want a job rose to 6.2 million, up 684,000 over the year, a concerning sign that workers are increasingly giving up on finding employment:
Marginally attached workers held steady at 1.8 million.
Discouraged workers decreased by 183,000 in December to 461,000, though this may reflect workers leaving this category either by finding work or ceasing their job search entirely.
Wage Growth Remains Above Inflation, For Now
Average hourly earnings rose to $37.02, representing 3.8% annual growth, still modestly ahead of inflation but with the gap continuing to narrow. As wage growth trends toward convergence with inflation in early 2026, workers will lose the real income gains that have provided some cushion over the past two years.
2026 Outlook
Without a fundamental shift in business confidence and hiring behavior, 2026 risks being another year where the labor market fails to generate the broad-based job growth needed to absorb available workers and maintain economic momentum.