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US Unemployment Rate Drops to 4.3% in December, Hitting a Quarterly Low as Labor Market Resilience Supports Soft Landing

By AI Insights

2026-02-12

Trend analysis based on the updated indicator. View the Indicator→

The US Bureau of Labor Statistics (BLS) released the latest data showing the unemployment rate was recorded at 4.3% in December 2025, down 0.1 percentage points from 4.4% in November, and significantly lower than the intra-year high of 4.6% set in October. This figure outperformed the Federal Reserve's (Fed) previous forecast in the Summary of Economic Projections (SEP) that the year-end unemployment rate would reach 4.5%, demonstrating that despite brief volatility at the beginning of the fourth quarter, the US labor market continues to exhibit resilience exceeding expectations. It has not shown signs of stalling or collapsing, successfully dispelling market concerns regarding an economic recession.

Observing recent trends, the unemployment rate presented a significant "inverted V-shaped" reversal in the fourth quarter of 2025 (4.6% -> 4.4% -> 4.3%). This indicates that the surge in October figures may have been influenced merely by seasonal factors or short-term labor supply shocks, rather than signaling the beginning of long-term deterioration. With the unemployment rate declining for two consecutive months and approaching the mid-2025 lows, this confirms that the labor supply and demand structure remains relatively tight, providing a solid foundation of support for consumer spending and economic growth in early 2026.

Regarding the driving factors behind the data, market institutions analyze that the phenomenon of "Labor Hoarding" remains the primary cause. According to market views cited by DBIA and Trading Economics, companies are currently adopting a widespread defensive strategy of "Low Hire, Low Fire," meaning they prioritize freezing new job openings over large-scale layoffs when demand slows. This structural characteristic allows the overall unemployment rate to remain at historically low levels even as non-farm payroll growth slows, aligning with the "soft landing" path favored by the Fed.

Looking ahead, in the short term (1-2 months), attention should be paid to potential data noise resulting from annual benchmark revisions and seasonal adjustments in early 2026; the unemployment rate is expected to fluctuate slightly within the 4.2% to 4.4% range. In the medium term (3-6 months), as inflation continues to converge toward the 2% target and the job market cools without deteriorating, the market widely expects the Fed to have the leeway to maintain a steady pace of rate cuts in the first half of 2026 (expected 2-3 rate cuts), further releasing liquidity to extend the economic expansion cycle.

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