Nonfarm payrolls rose by 64,000 in November, recovering from a revised decline of 105,000 jobs in October. The rebound exceeded market expectations, but much of the volatility in recent employment figures reflects temporary factors, including a large reduction in federal employment following deferred buyouts. More than 150,000 government workers exited payrolls in October, distorting the underlying trend in job growth.
Despite the improvement in headline job creation, the unemployment rate climbed to 4.6%, up from 4.4% in September, placing it near the upper end of policymakers’ projections for the year. This increase suggests that labour market conditions are easing, even if they are not deteriorating sharply. Hiring momentum appears uneven, and private-sector job growth remains modest when adjusted for benchmark revisions announced earlier this year.
Both the labour market and retail sales reports were delayed by a 43-day government shutdown, raising concerns about data reliability. These disruptions complicate the task of policymakers and investors trying to assess the true state of economic momentum heading into the Federal Reserve’s next policy meeting.
Implications for Federal Reserve Policy
For the Federal Reserve, the latest data reinforces a wait-and-watch approach. While the rise in unemployment underscores that restrictive monetary policy is having its intended effect, the rebound in payrolls and the presence of data distortions reduce the urgency for immediate action. As a result, expectations that the Fed will hold interest rates steady at its January meeting remain largely intact.
However, the upward drift in the unemployment rate strengthens the argument for gradual easing later in the year. The labour market is cooling enough to revive discussions around moving policy closer to neutral, especially if future data confirm a sustained slowdown rather than one driven by one-off factors. The Fed is likely to place greater emphasis on upcoming employment reports, particularly December’s data, which will be released ahead of the next policy decision and should be less affected by shutdown-related noise.
Market reaction reflected this balanced interpretation. Equity futures initially edged higher before turning lower, Treasury yields dipped briefly before stabilising, and the US dollar softened modestly. These moves suggest investors see the data as supportive of eventual rate cuts, but not decisive enough to shift the near-term policy outlook.
Looking ahead, if job growth remains subdued and unemployment continues to trend higher without a sharp drop in consumer demand, the Fed could begin cutting rates by March or later in 2026. For now, policymakers appear set to remain patient, awaiting clearer evidence that the economy is slowing in a more sustained and broad-based manner.