A drop in the unemployment rate could ease U.S. central bank concerns about labor market weakness, with Federal Reserve Chairman Jerome Powell making the last interest rate cut before his term ends in May and leaving any further policy easing in the hands of whomever President Donald Trump taps as Powell’s successor. The unemployment rate fell to 4.4% last month from a revised 4.5% in November, the US Labor Department reported on Friday, even as employers added 50,000 jobs in the month. Economists polled by Reuters had forecast a gain of 60,000.

Powell helped the Fed cut its benchmark overnight interest rate by three-quarters of a percentage point to avoid further softening of the job market, even as his more hawkish colleagues argued that doing so could slow or even threaten progress in bringing inflation down above the target.

Recent job market data appear to give the central bank some breathing space to leave short-term borrowing costs where they are, as Powell indicated last month that policymakers are inclined to do, at least in the near term.

Traders in rate futures tied to the Fed’s policy rate now see just a 44% chance of a rate cut by April, against similar odds earlier, with a resumption of rate cuts in June seen as a more likely scenario.

Powell’s term as Fed chief ends on May 15. Trump, who has repeatedly attacked Powell for failing to deliver the big rate cuts the president wanted, has said he has decided on a successor who supports further cuts in borrowing costs. An announcement is expected this month.

Signs of sluggish labor market A drop in the US unemployment rate in December “will affect the Fed’s recent urgency to backstop a weakening labor market,” said Olu Sonola, head of US economic research at Fitch Ratings. “That said, the weak headline job-growth story can’t be brushed aside. Hiring is still stuck at stall speed, and job growth in cyclical parts of the economy isn’t sending a comforting signal.”

US employers added just 548,000 jobs in 2025, down from about 2 million in 2024, data showed on Friday. Those who have not worked and are still looking for work for more than half a year now account for more than a quarter of the unemployed, and the number of people in part-time jobs because they could not find full-time work.

“Risks are skewed toward a pick-up in further cuts,” Pantheon ⁠Macro economists noted, suggesting continued pressure for more Fed easing, perhaps as early as March, even with Powell still at the helm of the central bank. Traders currently see a less than 30% chance of a rate cut by then.

There is still plenty of data to come before Powell steps down as Fed chief, including next month’s benchmark revision to labor market data, which showed much slower hiring than previously expected.

“The Fed remains very open to the possibility that underlying easing could still push the unemployment rate and other measures of recession higher again in the next couple of months,” wrote Krishna Guha, vice chairman of Evercore ISI. “But overall we see some support here for our view that the Fed will keep rates on hold until June, when it will deliver its first cut under the new chair.”