November’s delayed jobs report failed to deliver the clarity investors were looking for. Instead, it widened the divide among Wall Street economists debating whether the U.S. labor market is simply cooling or quietly starting to crack.
At the center of the debate is a simple but consequential question: is this slowdown controlled, or is it beginning to slip out of hand?
Shutdown Distortions Cloud Labor Trends
The Bureau of Labor Statistics data released Tuesday showed October payrolls fell by 105,000 jobs, driven almost entirely by a wave of 157,000 government layoffs tied to the shutdown.
That decline masked continued gains in private-sector hiring, which added 52,000 jobs during the month.
November, by contrast, saw government payrolls stabilize. Private-sector hiring rose by 69,000, lifting total payroll growth to 64,000 jobs — modestly above expectations but still well below levels typically associated with a healthy expansion.
Revisions reinforced the cooling trend. August payrolls were revised down by 22,000, from a loss of 4,000 to a loss of 26,000, while September was revised down by 11,000, to 108,000.
The sharper surprise came from the household data.
The unemployment rate rose to 4.6% in November, up from 4.4% in September and the highest level since September 2021.
For some economists, the data still points to a labor market steady enough for the Federal Reserve to remain patient. Others warn that with unemployment rising and job growth slowing, policymakers risk falling behind the curve if they do not follow through with another rate cut as early as January — despite market expectations leaning otherwise.
No Clear Warnings For The Fed
“Taken together, the October-November jobs data don’t change our view that the labor market is steady enough for the Federal Reserve to keep policy on hold until mid-2026,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics.
She highlighted that both October and November saw “healthy gains in private payrolls,” and that the stronger November headline was largely a timing issue tied to government job losses occurring earlier than expected.
Vanden Houten also cautioned against overinterpreting the rise in unemployment, pointing out that the Bureau of Labor Statistics was unable to conduct a household survey in October, complicating November’s data collection.
She added that the number of permanent job losers declined in November and that labor force growth played a role in pushing the unemployment rate higher.
David Russell, global head of market strategy at TradeStation, echoed that view, indicating that higher unemployment does not necessarily translate into broader economic weakness.
“Higher unemployment might seem dovish for rates,” Russell said. “However, it resulted from government job cuts and not weakness in the cyclical economy.” He highlighted a longer-than-expected workweek and healthy retail sales as signs that demand remains intact.
According to Russell, the report does little to alter the Fed’s trajectory after three rate cuts, especially with fiscal stimulus expected to support growth.
A Growing Camp Sees Cracks Forming And Further Cuts Needed
Other economists are far less convinced.
Heather Long, chief economist at Navy Federal Credit Union, described the current environment as a “hiring recession,” noting that job growth has been effectively flat since April. Payroll gains since May have been inconsistent and modest, while wage growth has continued to slow.
“Almost no jobs have been added since April,” Long said, indicating that there are now 710,000 more unemployed Americans than there were in November 2024.
She attributed the weakness to a combination of tariff impacts, artificial intelligence adoption, and aggressive corporate cost-cutting.
Mohamed El-Erian, chief economic advisor at Allianz, also warned that the report should not be dismissed entirely as noise. While acknowledging shutdown-related distortions, El-Erian said that if forced to draw a conclusion, the data points toward a weakening labor market, one that “warns against an extended Fed rate pause.”
“The latest jobs data pressure the Fed to cut rates again when they next meet in January. Hiring momentum has weakened in recent months, and the Fed will want to arrest this deterioration and help labor demand regain traction,” said Bill Adams, chief economist for Comerica Bank.
Comerica is now pushing back against market consensus, forecasting a quarter-point rate cut at the Fed’s January 28 meeting even as CME FedWatch shows only a 30% probability priced in.
Charlie Bilello, chief market strategist at Creative Planning, noted that total U.S. job growth over the past year has slowed to just 0.6%, the weakest pace since March 2021.
“In the past 50 years, this type of weakness in the labor market has preceded a recession and a spike in the unemployment rate 100% of the time,” Bilello said.
Market Reactions: Stocks Ease, Gold Gains
The jobs report left Wall Street searching for clarity, with major stock indexes edging lower in early New York trading.
The S&P 500 — tracked by the Vanguard S&P 500 ETF (NYSE:VOO) — slipped 0.3% to 6,790, on track for its third consecutive session of losses.
Meanwhile, investors continued to flock to gold amid rising economic uncertainty. Bullion prices — tracked by the SPDR Gold Shares (NYSE:GLD) — climbed 0.5% to $4,320 an ounce, hovering within striking distance of the record highs near $4,250 set in October.
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