The October and November U.S. jobs report added little clarity to the direction of the low-fire, low-hire American labor market that saw 105,000 jobs lost in October and 64,000 positions created in November.
The unemployment rate increased to 4.6% (4.564% when taken to three digits) and has increased in each of the four past jobs reports.
We anticipated that once the government reopened there would be a few months of noisy data, and we would not get a real sense of where the jobs market is until early 2026. That is exactly what we got in an extraordinary jobs report for October and November released on Tuesday.
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It is best not to overinterpret this data because there will most likely be subsequent revisions to the initial estimates for both months.
The one major takeaway is that hiring and wage growth has slowed as the holiday shopping season approaches, suggesting that growth will weaken in the final months of the year.
Because of the three shocks to the economy—trade, immigration and the government shutdown—we think that gross domestic product for this year will show a 1.5% growth rate when all is said and done.
In October, government hiring declined by 157,000 positions, which was almost certainly linked to the DOGE-era layoffs early in the Trump administration.
If one excludes government jobs from the data, private sector hiring advanced by an average of 75,000 jobs over the past three months, in contrast with the top-line average gain of 22,000 over that same period.
The underlying tone of the data implies a weak hiring trend everywhere but in private education and health care, where 65,000 jobs were added in November after a solid 59,000 increase in October. Outside those gains, hiring was weak in most sectors for both months.
Policy implications
The payroll data most likely reaffirmed the call of those at the Federal Reserve who voted to reduce the policy rate at the December meeting. During Chair Jerome Powell’s press conference, he noted that it may be the case that the first estimate of monthly employment dynamics is overstating new job creation by 60,000 per month.
Often late in business cycles, the Bureau of Labor Statistics tends to overestimate hiring only to revise those estimates lower in ensuing benchmark revisions.
If that is the case, then the door is open to a near-term rate cut, especially if the January employment data looks weak. We expect two rate cuts in 2026 as the Fed moves the median federal funds rate back to 3%.
The data
The impact of DOGE-era buyouts and layoffs skewed the November data to the point where it has little current economic meaning in the private sector, where an average of 75,000 jobs were created over that time compared with the 22,000 top-line figure.
In November, 19,000 goods-producing jobs were created, 28,000 in construction, 12,000 in professional business services and 65,000 in private education and health care.
In categories where jobs were lost in November, 5,000 positions were shed in manufacturing, 12,000 in trade and transport, 4,000 in information, 2,000 in financial, 12,000 in leisure and hospitality, and 5,000 in government.
In October, out of 59,000 health care jobs and 16,000 new leisure and hospitality positions created, there were job losses in every other category.
In November, average hourly wage growth slowed to 0.1% on the month and was up by 3.5% from a year ago, which implies that real wage growth slowed to 0.5%.
The takeaway
Little clarity was provided by the combined October and November jobs data. The low-fire, low-hire jobs market remains intact as the unemployment rate continues to climb.
The primary source of hiring continues to be in health care, with modest gains or losses across other sectors becoming the norm over the past several months.
Wage growth is easing into a sustained affordability crisis, which increases the degree of difficulty for the Federal Reserve as it sets monetary policy.
Combined slowing in hiring and wage growth will provide a dour end to what is shaping up to be a lost year of weak growth in the American economy.
