The U.S. employment report came in more or less expected for December, leaving economists confused about the Fed’s next move.

The report shows that while job losses increased, the rate of loss is slowing.

December payrolls fell 124,000 and the jobless rate jumped to 5.8%. BMO Nesbitt Burns notes that stripping out government job gains shows that 187,00 private sector workers lost their jobs in the month.

“After closing the year with five straight monthly declines, payroll employment now stands more than 1 million lighter than the comparable year-earlier figure. That’s the worst calendar year performance since the early 1980’s recession,” notes CIBC World Markets.

But, despite the negative headline, CIBC sees some encouraging developments in today’s report. “A 0.1% rise in average weekly hours left total hours worked unchanged in the month, with factory hours actually scratching out a modest 0.1% advance. And consumers got a boost in buying power, as hourly earnings rose 0.5% in both December and November.”

Barring any material shift in productivity, CIBC says this report would leave Q4 output heading for another roughly 1% contraction.

Royal Bank economists say, “Despite the deterioration in the labour market, the better-than-expected performance and the mixed performance across industries suggest that the worst of the job losses are likely over.”

“The declines in employment (and also in help supply services) will keep the Fed focused on downside risks. However, the data are consistent with the view that the economy is approaching a bottom,” says BMO. “The report still, at least in our view, leaves the door open to Fed easing at the end of the month.”

CIBC admits that recent conflicting data leaves the outlook for the late-January FOMC meeting in doubt. “While we’re still inclined to bet against a further cut in Fed Funds, the odds of another insurance move will rise the longer the government’s stimulus bill remains stalled.”