Looking at the data:
• The unemployment rate ticked up to 4.6% in November. As always, given the statistical noisiness of the household data, we need to average across multiple months to smooth out the noise. But the rise in unemployment is credible given the ongoing weakness in job growth figures. Furthermore, wage growth slowed to 3.6% year-over-year in November, down from 3.8% as of August, which confirms that slack is increasing in the labor market.
• At the industry level, the weak job growth in the three months ending in November was driven almost entirely by the federal government. Private employment expanded at a 0.7% annualized rate, an improvement compared to the 0.1% in the prior three-month period (ending in August). That acceleration in private employment was driven heavily by construction. However, healthcare and leisure industries are still accounting for all aggregate private job growth; excluding those categories, private employment was about flat in the past three months, with significant declines in transportation, manufacturing, and information industries.
• Federal employment has dropped 6% since August and is down 9% altogether since January. According to the BLS, the latest drop should not have been driven by the shutdown directly. Instead, federal employees who accepted a deferred resignation offer during the DOGE-related cuts earlier in 2025 are now finally falling off the payroll. Federal employees who didn’t work during the shutdown should have been classified as “on furlough,” but still among the ranks of the employed.
The Fed should now have no misgivings about its 0.75 percentage points in rate cuts delivered in the closing months of 2025. Indeed, if today’s data is confirmed by subsequent readings, we could see two or three rate cuts in the first half of 2026, rather than the single cut priced in by the market as of yesterday. On the other hand, we think it’s still very likely the Fed pauses in January, as it will take some time to see how the rate cuts at the end of 2025 impacted the economy.
The latest US jobs report for November 2024 delivered a classic case of economic mixed signals: robust job creation alongside a tick higher in the unemployment rate. The Bureau of Labor Statistics reported that the economy added 227,000 jobs—well above economists' expectations of around 200,000-220,000—while the unemployment rate edged up to 4.2% from 4.1% the previous month. This marked the highest unemployment rate since October 2021, even as the labor market showed clear signs of rebounding strength.
Key Highlights from the Report
- **Job Additions**: 227,000 nonfarm payrolls added, a sharp rebound from October's heavily revised figure of just 36,000 jobs (up from an initial report of 12,000). September gains were also revised higher to 255,000.
- **Unemployment Rate**: Rose slightly to 4.2%, in line with forecasts. This small increase pushed it to its highest level in over three years.
- **Sector Breakdown**: Gains were concentrated in healthcare (+54,000), leisure and hospitality (+53,000), and government (+33,000). These sectors drove much of the recovery, offsetting lingering weaknesses elsewhere.
- **Wage Growth**: Average hourly earnings rose 0.4% month-over-month, pushing the annual increase to 4%.
- **Labor Force Participation**: Dipped slightly to 62.5%, contributing to the nuanced picture from the household survey (used for the unemployment rate) versus the establishment survey (used for payroll numbers).
The October weakness was largely attributed to temporary factors: hurricanes in the Southeast and a Boeing workers' strike, both of which suppressed hiring last month. With those disruptions fading, November's numbers reflect a return to more normal growth patterns.
Why Did Unemployment Rise Despite Strong Job Gains?
This is the headline puzzle. Payroll growth measures jobs added at businesses, while the unemployment rate comes from a separate survey of households. Discrepancies between the two are common, but here the rise in unemployment likely stemmed from shifts in labor force dynamics—such as a slight drop in participation or more people re-entering the job search without immediately finding work. Notably, the rate for Black workers jumped to 6.4%, highlighting uneven impacts across demographics.
Economists described the overall picture as a "remarkably calm labor market" at full employment, with the low-4% unemployment range signaling the elusive "soft landing" many had hoped for: cooling without a sharp downturn.
Broader Implications
At the time, this report bolstered expectations for a Federal Reserve interest rate cut in December 2024, as solid growth tempered by modest labor market softening gave policymakers room to ease. Wage pressures remained elevated but not runaway, supporting the view of a resilient economy navigating post-pandemic normalization.
Looking back from 2025, this report captured a pivotal moment: the labor market proving durable amid higher rates, yet showing early signs of gradual cooling. It underscored how temporary shocks can distort monthly data, reminding us to focus on trends over headlines.
Overall, November 2024's numbers painted a picture of strength with subtle caution—classic for an economy in transition. The full Yahoo Finance article that inspired this post highlights these tensions vividly, capturing the ongoing debate about what constitutes a healthy labor market in the current era.
The latest labor market data do little to change the view that the labor market is continuing to grow slowly, said Richard Moody, chief economist at Regions Financial Corp.
"Perhaps the best way to put it is that the additional data do little to change how we see the labor market i.e., not robust by any means but holding up better than many think to be the case," Moody said in a note to clients.
The mixed retail-sales data for October show consumers have slowed down but haven't stopped spending.
"The broad takeaway for me is that the consumer in the aggregate continues to plow ahead, despite all the negative buzz around the K-shaped economy," said Stephen Stanley, chief U.S. economist at Santander.
Let's assume the government's jobs report is accurate — and that's no sure thing lately. The private sector of the economy added an average of 75,000 new jobs from September to November.
How good, or bad, is that?
In reacting to today’s jobs data for October and November during a CNBC interview, a top economist in the Trump administration emphasized the increase in private-sector employment.
“You're looking at private-sector gains of about 120,000, maybe [121,000], and then we dropped about 160,000 federal government workers, who are the people who took the buyout,” said Kevin Hassett, who is the director of the National Economic Council and a candidate for Federal Reserve chair. “We began that program in the spring and gave people till the fall to step aside, and so I think that from the private-sector point of view, it's just about what we've been getting all year. It's solid upward trajectory.”
The furlough of hundreds of thousands of federal workers during the 43-day government shutdown may be partly responsible for the increase in the U.S. unemployment rate to a four-year high.
The furloughs do "appear to have contributed to the unemployment rate coming in at 4.6% in November, as there was a meaningful jump in the number of unemployed public-sector workers," said Richard Moody, chief economist at Regions Financial.
The Job Market Slowdown: What's Really Happening?
The headlines over the past few months have painted a picture of a sluggish job market. The unemployment rate has risen, and reports show that job growth has stalled in recent months. But as we dig deeper into the data, the situation isn’t as grim as it first appears. Here’s a breakdown of what’s actually going on in the job market.
The Big Picture: A Gradual Slowdown, Not a Crisis
Yes, the unemployment rate did rise to 4.6% in November, marking its highest point in four years. And yes, the economy saw a contraction in overall employment between October and November. But the story behind these numbers is more nuanced. Instead of signaling a sharp downturn, these figures point to a continuation of a long, gradual slowdown that has been unfolding for months.
The job losses during this period were largely driven by federal government cutbacks, with 162,000 federal jobs disappearing as a result of the fiscal year’s end and the DOGE buyout program. This accounts for the bulk of the reported job losses. Moreover, the rise in the unemployment rate could have been exaggerated by statistical quirks tied to the federal shutdown and the absence of October’s data.
As economist Joe Brusuelas aptly put it in his analysis, “If you are not confused, you are not paying attention.” It’s a complex landscape, but there’s no need to panic just yet.
Breaking Down the Numbers
Here are some of the key numbers from the October-November period:
Unemployment Rate: The jobless rate increased from 4.4% in September to 4.6% in November. While this may seem like a significant jump, the increase is relatively modest when you consider the finer details. The rate actually rose from 4.44% to 4.56% when measured with greater precision, which suggests the rise wasn’t as sharp as the headlines imply.
Job Losses and Gains: Employers shed a net 105,000 jobs in October, but added 64,000 jobs in November. However, most of the October losses were due to government cuts. Private payrolls, on the other hand, have been steadily increasing by an average of 75,000 jobs per month over the past three months—indicating a healthier private-sector job market than some of the data sources, like payroll processor ADP, suggest.
Statistical Oddities: The absence of data from October skewed the November unemployment survey, as a higher-than-usual number of participants were answering the survey for the first time. This factor likely contributed to the unexpected rise in the unemployment rate, so it’s important not to read too much into the figure without context.
Key Takeaways: Job Market Still Soft, But Not Collapsing
Despite some worrying headlines, the composition of job gains points to a soft, but not catastrophic, job market. The sectors leading job growth are overwhelmingly in health care and social assistance, which accounted for a whopping 116% of private-sector job gains across October and November. That means other industries, including manufacturing and transportation, have been shedding jobs.
For instance, employment in the transportation and warehousing sector is down by 78,000 since February, and manufacturing has lost 66,000 jobs over the same period. These trends are concerning, especially when compared to the typical cyclical booms seen in past recoveries, but they don’t signal an all-out economic collapse.
What Does This Mean for the Fed?
The Federal Reserve, which recently cut interest rates, remains cautious in its outlook. Chairman Jerome Powell has been vocal about the uncertainty surrounding the data. In a recent speech, he noted the difficulty in assessing the job market, pointing out the "very technical reasons about the way the data are collected" that could distort the numbers.
Given this uncertainty, the Federal Reserve isn’t expected to make any major decisions based on the recent data alone. Instead, they’ll likely be waiting for clearer numbers in the coming months, especially after the December jobs data is released in early January.
Looking Ahead
So, what can we expect in the coming months? The job market will likely continue its gradual slowdown. However, there’s no indication that we’re headed for a sharp downturn. With the December jobs report due in January, we should get a clearer picture of whether the labor market is still cooling off at a steady pace or if there are any signs of a more significant shift.
In the meantime, it's important to stay grounded in the facts. While the labor market may be facing some challenges, it’s far from the crisis that some headlines might suggest. Keep an eye on the data, but don’t let the noise distract you from the broader, more gradual trends shaping the economy.