Goldman Sachs' Jan Hatzius Assesses December 2025 Jobs Report as 'Not Strong'

The December 2025 employment report showed U.S. nonfarm payrolls rising by 50,000 jobs, below the 73,000 Dow Jones estimate [3][4]. The unemployment rate declined to 4.4% from 4.5% [3][4]. Jan Hatzius noted that seasonal adjustments inflated state and local government employment by approximately 80,000 jobs [1].

More significantly, 2025 was the weakest annual job growth year since 2003, with just 584,000 jobs added for the entire year [5]. Almost 85% of gains occurred by April, with minimal hiring thereafter [5]. The three-month nonfarm payroll average was negative 22,000 [2].

Hatzius confirmed Goldman Sachs’ view that a January rate cut is unlikely despite weaker labor data [1]. Rate cuts are expected to resume in September 2026 as “growth remains below trend” [1]. Financial markets priced only about 10% probability of a January cut [5].

The average effective tariff rate rose 11 percentage points in 2025, exceeding Goldman’s 4-point assumption [6][7]. This cut approximately 0.6 percentage points from U.S. GDP in H2 2025 [7]. If rates remain unchanged, the negative impact is expected to fade in 2026 [7].

Major indices posted modest gains: S&P 500 +0.51%, NASDAQ +0.68%, Russell 2000 +0.70% [9]. Real Estate led sector performance at +1.40%, while Energy declined 0.89% [9].

: The concentration of 2025 gains in Q1, followed by eight months of minimal hiring, indicates persistent employer caution. Goldman layoff tracker components have risen notably [8].

: The unemployment rate decline partly reflects workers leaving the labor force, meaning 4.4% may overstate labor market health [1].

: With tariff impacts already absorbed, Goldman’s 2.6% 2026 GDP forecast exceeds the 2.0% consensus [6].

: Labor market deterioration (underlying trend at 39,000 jobs/month), tariff policy uncertainty, and inflation persistence above 2% target [8].

: Easier financial conditions expected from anticipated Fed cuts, $100 billion in tax refunds in H1 2026, and fading tariff drag [6][8].

: The January 27-28 FOMC meeting is the first key policy inflection point.

The December 2025 report revealed labor market weakness masked by headline numbers and seasonal adjustments [1][3][4]. Goldman expects the Fed to remain on hold through mid-2026 before resuming cuts [1]. Despite 2025’s weak job growth, the economic outlook for 2026 remains constructive at 2.6% GDP growth, driven by tax cuts, reduced tariff drag, and easier financial conditions [6]. Markets interpreted the data as supportive of eventual Fed accommodation, explaining the positive equity response [9].