The economy added 256,000 jobs in December, and the unemployment rate fell a tenth of a percentage point to 4.1%, the Bureau of Labor Statistics reported Friday.

Investors expected roughly 155,000 new jobs and the unemployment rate to remain at 4.2%.

What it means…for Trump

December’s jobs growth is welcome news for President-elect Donald Trump, who will now be the face of the economy. Trump will hope to continue the job growth notched under President Joe Biden. In fact, there has not been a monthly decline in jobs in four years.

In the coming year, Democrats will expectedly seize on any weakness in the labor market and attempt to blame it on Trump. Conversely, Trump will tout employment gains as proof that his presidency has been a boon for the economy. 

What it means for…the Fed

While positive, overall job growth has been slowing over the past year. If the labor market starts to meaningfully sputter or even turn negative, it could force the Federal Reserve to cut its interest rate target at a more aggressive pace in order to shore up the economy.

After a long period of very high interest rates designed to quash inflation, the Fed finally began cutting short-term rates in September. Investors expect that the central bank will continue lowering rates this year. 

The underlying reality

December’s report suggested the labor market is still chugging along.

Trump will enter office with a resilient, although slowing, labor market. 

It is helpful to look at the overall trend for the labor market. The three-month moving average of job gains fell very slightly in December to 170,000, still above the rate needed to keep up with population growth.

Roughly 112,000 new payroll jobs are needed each month to keep unemployment from rising, according to the Federal Reserve Bank of Atlanta. Note, though, that a separate estimate that takes into account the full extent of recent immigration puts the number as high as 200,000.

Prime-age employment, relative to the overall population, is strong by historical standards.

This story is breaking and will be updated.