The U.S. economy added 256,000 jobs in December, roughly 100,000 jobs more than expected. The unemployment rate ticked down to 4.1% from November’s 4.2%.

December’s jobs figure was even higher than November’s 212,000, which experts said was skewed higher by people returning to work from strikes and hurricanes.

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December’s Labor Department’s report appeared to be buoyed by a 72,000-job swing in retail trade.

In December, retail trade added 43,000 jobs, while it lost 29,000 jobs in November. Health care, government and social assistance, along with leisure and hospitality, all saw double-digit gains as well.

While the country saw a rise in unemployment earlier in 2024, the Bureau of Labor Statistics said the unemployment rate has held steady at 4.1% or 4.2% for the past seven months.

“I continue to believe that the U.S. economy is on a solid footing,” Federal Reserve Governor Christopher Waller said earlier this week. “I have seen nothing in the data or forecasts that suggests the labor market will dramatically weaken over coming months.”

Labor market weakness is what triggered the Federal Reserve to start cutting its benchmark interest rate in September, even as progress on inflation stalled. After a jumbo-sized 50-basis-point cut, the Fed made two more 25-basis-point cuts to close out the year, dropping the federal funds target range to 4.25% to 4.5%, a full percentage point below its 2024 peak. 

However, as the labor market showed renewed resilience, inflation started to rise. Consumer prices rose 2.7% for the year ending in November, after rising 2.6% in October and 2.4% in September.

“This minimal further progress has led to calls to slow or stop reducing the policy rate,” Waller said Wednesday, Jan. 8. “However, I believe that inflation will continue to make progress toward our 2% goal over the medium term and that further reductions will be appropriate.”

In December, the Fed released its latest economic projections, which forecast just two cuts in 2025, down from the previous forecast of four. In response, interest rate expectations rose.

This week, the average rate of a 30-year mortgage hit 6.93%, the highest level since July, and nearly a full percentage point higher than when the Fed started cutting its rate in September.

Why are mortgage rates going up while the Fed is cutting rates? Watch this video.

On Thursday, Jan. 9, the probability market had the Fed holding rates steady until June. It was split on whether the Fed would do a second cut in December or hold steady at one cut for the year.

Minutes released this week from the Fed’s last meeting revealed added concern about inflation. Without naming President-elect Donald Trump or his tariff and immigration policies, the Federal Open Market Committee multiple times brought up the unknown impact those policies might have on the economy.

“Almost all participants judged that upside risks to the inflation outlook had increased,” the minutes read. “As reasons for this judgment, participants cited recent stronger-than-expected readings on inflation and the likely effects of potential changes in trade and immigration policy.”