U.S. Jobs Number Comes in Light, Markets Moving Higher

U.S. stock markets look set to open higher this morning, buoyed by a softer-than-expected December jobs report that tempered expectations for further Federal Reserve interest rate hikes in the near term. The S&P 500 (SPY) indicated a green start, up 0.37% in pre-market trading as investors digested the implications of the labor market data.

The Bureau of Labor Statistics reported that nonfarm payrolls increased by a seasonally adjusted 50,000 in December, falling short of the Dow Jones estimate of 73,000 and November's revised 56,000. The unemployment rate, however, edged down to 4.4%, surpassing forecasts of 4.5%.

This mixed data painted a complex picture of the labor market, with companies reporting subdued hiring activity alongside employment gains reported by households. Revisions to prior months further complicated the analysis, with November's payrolls revised down by 8,000 and October's losses significantly larger than initially reported, now standing at 173,000 compared to the prior estimate of 105,000. For the full year, payroll gains averaged 49,000 per month, a stark contrast to the 168,000 seen in 2024.

Markets are interpreting the jobs data as a signal that the Federal Reserve may maintain its current interest rate policy, following three cuts implemented in the latter part of 2025. The central bank has been closely monitoring labor market indicators to guide its monetary policy decisions. While some have advocated for additional rate cuts, the economy has demonstrated resilience, supported by strong consumer spending and positive GDP growth.

The Atlanta Fed’s GDPNow model projects a robust 5.4% annualized growth rate for the fourth quarter, following a 4.3% rate in the third quarter. This positive economic momentum is partly fueled by strong consumer spending during the holiday season. Adobe Analytics estimates that online spending surged 6.8% year-over-year to a record $257.8 billion, underscoring the strength of consumer demand.

Despite the weaker jobs data, the overall economic picture suggests that the U.S. economy remains on a solid footing. The combination of robust consumer spending and positive GDP growth projections may lead the Federal Reserve to adopt a cautious, wait-and-see approach before considering further rate adjustments. Markets currently anticipate the next rate cut to occur in June, but this timeline could shift based on future economic data releases.

The December jobs report, while presenting a mixed bag of results, has instilled a sense of cautious optimism in the markets. The S&P 500's positive pre-market performance reflects the belief that the Federal Reserve will remain patient in its approach to monetary policy, allowing the economy to continue its growth trajectory. The near-term outlook hinges on continued strength in consumer spending and a stabilization of the labor market.