WASHINGTON, Jan 9 (Reuters) - U.S. job growth likely slowed in December amid business caution about hiring because of import tariffs and rising artificial intelligence investment, though an anticipated easing in the unemployment rate to 4.5% could support expectations the Federal Reserve will leave interest rates unchanged this month.

The Labor Department's closely watched employment report on Friday is expected to show the labor market remained stuck in what economists and policymakers have called a "no hire, no fire" mode. It would also confirm the economy was in a jobless expansion. Economic growth and worker productivity surged in the third quarter, in part attributed to ‌the AI spending boom.

"It's not so much weak demand because the economy seems to be doing not bad, but businesses are very cautious about taking on new workers," said Sal Guatieri, a senior economist at BMO Capital Markets. "That's possibly related to the ​desire to keep costs under control, perhaps in the face of tariffs, but also because many businesses believe there will be some productivity payoff from AI-driven automation."

Nonfarm payrolls probably ‍increased by 60,000 jobs last month after rebounding by 64,000 in November, a Reuters survey of economists estimated. The economy lost 105,000 ⁠jobs in October, the largest decrease in ⁠nearly five years, mostly federal government employees who took deferred buyouts. They received their last paycheck at the end of September.

Economists estimate that between 50,000 and 120,000 jobs need to be created each month to keep up with growth in ‌the working-age population. 

The labor market lost considerable momentum last year, with well-below one million jobs estimated ​to have been added. Roughly 2 million jobs were created in 2024, though this number could be revised lower when the Bureau of Labor Statistics publishes its payrolls benchmark revision next month with the January employment report. 

The BLS has estimated about 911,000 fewer jobs were created in the 12 months ⁠through March than previously reported. The overcounting has been blamed on the birth-death model, which ‍is used by the ​BLS to estimate how many jobs were gained or lost because of companies opening or closing in a given month. 

Last month, the BLS said it would, starting in January, change the birth-death model by incorporating current sample information each month.

JOB GROWTH SLOWED SHARPLY LAST YEAR

The sharp moderation in job growth last year was ‍largely blamed on President Donald Trump's aggressive trade and immigration policies, which economists and policymakers said reduced both demand for and supply of workers. Some economists say low supply has prevented a sharp rise in the unemployment rate.

The jobless rate increased to a more than four-year high of 4.6% in November from 4.4% in September, partially distorted by the 43-day federal government shutdown, which also prevented the collection of household data for October. The unemployment rate for October was not published for the first time since the government started tracking the series in 1948.

"There has been continuous uncertainty over tariffs," said Dan North, senior economist at Allianz Trade North America. "We also have a falling supply of labor since the foreign-born labor is shrinking ​fairly rapidly." 

The government will ‍together with the December employment report publish annual revisions to the seasonally adjusted household survey for the past five years. The unemployment rate is calculated from the household survey. The annual population control adjustments, normally incorporated with the January employment report, will be delayed.

While the median forecast in a Reuters poll of economists ​was for the jobless rate to have eased to 4.5% in December, some saw the rate ticking higher to 4.7%, which they argued would open the door to a rate cut this month. They cautioned against viewing any better-than-expected December payrolls print as a sign of labor market improvement, citing difficulties adjusting the data around year-end.

"A 4.7% unemployment rate in December would not only confirm that November was relatively free of shutdown-related measurement issues, but that downside risks to the labor market have increased even more since the Fed's December meeting," said Veronica Clark, an economist at Citigroup.

The U.S. central bank cut its benchmark interest rate  by a quarter of a percentage point to the 3.50%-3.75% range in December, but officials indicated they were likely to pause further reductions in borrowing costs for now to get a better sense of ​the economy's direction.

Job growth last month likely remained narrow, concentrated in the healthcare and social assistance sectors. Given that factors like tariffs and AI were preventing companies from hiring more workers, economists are increasingly viewing the labor market's challenges as more structural than cyclical.

"Lowering interest rates may help to buoy the economy at the margin, but it is unlikely to push companies that are on temporary hold as it relates to hiring decisions due to tariff-related uncertainty ‍to add workers," said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets. "The Fed is certainly powerless to counteract the concerns related to AI."