US unemployment declines despite weaker-than-expected NFP

As on every first Friday of the month, US unemployment and NFP data were released. In this regard, the US unemployment rate declined from 4.5% to 4.4% in December, signalling continued resilience in the labour market. At the same time, US December Non-Farm Payrolls (NFP) rose by 50,000, down from 56,000 in November and well below the 73,000 expected. This weaker-than-anticipated job growth is notable given the Christmas period, which typically supports higher employment through seasonal hiring and the creation of temporary and new job positions.

Despite the softer headline payroll figure, market participants have not materially altered their expectations for US monetary policy.

Hence, traders continue to price in two Federal Reserve interest rate cuts in 2026, suggesting that the decline in the unemployment rate has offset concerns stemming from the weaker NFP data and reinforced the view that the labor market remains sufficiently tight to delay more aggressive easing.

Benedetta Zimone