“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,” Joseph Brusuelas, chief economist at corporate advisory firm RSM, wrote in a blog post.
Despite potential statistical distortions from the shutdown, the report underscored that private employers remained stuck in low-fire, low-hire mode in October and November, while unemployment reached the highest rate in four years. Wage growth has stalled.
The Federal Reserve cut interest rates last week, with most officials saying they were more worried about the job market falling apart than inflation heating up. Tuesday’s payroll numbers show their concerns weren’t unfounded:
- The private sector added an average of 60,500 jobs in the past two months, extending a mostly anemic run of hiring, while the federal workforce declined by 168,000 as DOGE-related deferred resignations took effect.
- The jobless rate crept up to 4.6 percent in November from 4.4 percent in September. (The Labor Department didn’t tally unemployment in October due to the 43-day shutdown.)
- The number of people working part time because of economic conditions increased by more than 1 million, or 24 percent, over the past year.
“The labor market is showing growing fragility as firms grapple with uneven demand, elevated costs, [profit] margin pressure and persistent uncertainty,” economists Gregory Daco and Lydia Boussour said in note.
Here are some job trends I’ll be watching as we move into the new year.
Just a few sectors are in hiring mode.
The economy is vulnerable to a downturn when job growth is limited to a few sectors.
Advertisement
Health care and social assistance accounted for most of the new jobs in November, with a smaller gain in construction.
The economically sensitive manufacturing and transportation-warehousing industries lost jobs, as did information and finance, two largely white-collar sectors that are important employers in Massachusetts. (State-level data for November will be published later this month.)
Layoffs are low but will that last?
Employers are moving cautiously as they assess the impact of tariffs on their businesses, the direction of consumer spending, and whether artificial intelligence might allow them to operate with fewer workers.
Because the slowdown in hiring has yet to turn into a wave of firing, unemployment is relatively low by historical standards even after recent increases.
But there are concerning signs.
- The unemployment rate among Black workers climbed to 8.3 percent last month from 6.4 percent a year earlier even as white unemployment was little changed. Black workers are often hit first when hiring slows or layoffs begin.
- Similarly, the jobless rate for workers without a high school diploma has risen to 6.8 percent from 6 percent over the past year, and unemployment among 20-24 year olds is at its highest level (excluding the COVID shock) since 2015, the tail end of the long “jobless recovery” that followed the Great Recession.
Slack is building in the labor market.
The supply of workers is growing — surprising some economists who expected a decline amid the Trump administration’s immigration crackdown and aggressive deportation campaign.
With hiring on the decline, many people are idle or not working as many hours as they would like.
The U-6 unemployment rate — a measure of labor-market slack that counts not only the officially unemployed, but also discouraged workers who’ve stopped looking and people stuck in part-time jobs who want full-time work — jumped to 8.7 percent in November from 8 percent in September. That’s the highest rate since early 2017 (excluding the COVID era).
How does the Fed react?
Last week, Fed chair Jerome Powell said the central bank’s quarter-point cut, plus two others since September, should be enough to shore up hiring while allowing inflation to resume falling toward officials’ 2 percent target.
Most Fed watchers don’t think the latest jobs report alters that view — for now — and are forecasting just two more rate cuts in 2026.
Advertisement
“The report contains enough softness to justify prior rate cuts, but it offers little support for significantly deeper easing ahead,” Kevin O’Neil at Brandywine Global, told Bloomberg.
Final thought
Massachusetts, which has been shedding jobs this year, seems to be leading the way for the rest of the country.
Call me cautiously pessimistic: Things will get worse before they get better.
Larry Edelman can be reached at larry.edelman@globe.com.