The Projected US unemployment rate rose in November, hitting a four-year high of 4.6%. This comes as an increase from 4.4% in September. Despite this welcome news, the increase further clouds the outlook for the job market as the nation faces a damaging government shutdown and continues battling inflationary pressures. The US Labor Department moved the November jobs report release date back by more than a week. That pause came in part from a 43-day federal government shutdown, and now, this Friday’s report will mark the first detailed look at our labor market since that shutdown.
Job growth November was a surprisingly solid month as the US economy added 64,000 jobs, beating many economists’ expectations. The numbers come on the heels of major layoffs across many industries. Manufacturing employment decreased by 5,000 jobs and transportation and warehousing lost 18,000 jobs. The healthcare sector saw robust growth, with an increase of 46,000 jobs, which includes 11,000 jobs in nursing and residential care facilities.
The job market’s mixed signals present a challenge for the US central bank as it navigates the complexities of rising prices alongside a weakening job market. Federal Reserve officials are constantly balancing these competing priorities and considering the current state of the economy. Projections released last week show that they most often still plan to cut a rate hike by 2026.
The November jobs report, delayed due to the government shutdown that persisted through mid-November, reflects the ongoing turbulence within federal employment. Last month, the federal government eliminated about 162,000 jobs. Many of those workers, victims of the Trump administration’s Department of Government Efficiency, lingered on payrolls until then.
Economists and analysts warned against jumping to conclusions based on the new jobs data. Seema Shah emphasized that the Federal Reserve is “likely to view today’s jobs data with a fair degree of scepticism” and that these figures “should not be taken at face value.” We couldn’t agree more with this statement by Chris Zaccarelli. As for the data-dependent Fed, he said that the morning’s data will only make the internal debate on the direction of monetary policy even more heated.
The labor market is changing fast even as the economy continues to grapple with persistent challenges. That’s why it’s so important for policymakers to read these signals the right way. Ms. Shah cautioned that the current trends may “trigger some creeping concern within the Fed,” indicating an awareness of potential risks ahead.