The December labor report indicated the divide between company payroll growth and unemployment continues to widen. Fed officials will take comfort in a slight decline in the headline unemployment rate, while a lackluster payroll gain combined with significant downward revisions to prior months dampens the overall labor picture.

The Bureau of Labor Statistics (BLS) reported U.S. businesses added just +50k jobs to payrolls in December, below the median forecast of +70k. In addition, the previous two months were revised lower by a combined -76k. The recalculations increased October payroll losses from -105k to -173k and reduced the November gain from +64k to +56k. Over the past three-month period, payrolls are now negative, averaging -22k. That being said, -162k federal government jobs dissolved by DOGE disappeared from the count in October, thereby distorting the payroll picture for the quarter.

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