October and November non-farm payrolls were released together today, as U.S. government agencies attempt to get back on track following the longest federal government shutdown in history. October payrolls, expected to decline by -25k, were down instead by -105k, while November payrolls rose by +64k, slightly better than the +50k estimate. Both August and September were revised lower by -22k and -11k, respectively; that is consistent with the -33k revision reported as part of the severely delayed September jobs report released in late November.
Looking more closely at November’s report, health care and social assistance hiring once again led the way, adding +64k jobs combined. Construction was also strong at +28k new jobs, while retail added another +6k. Meaningful declines were reported in transportation & warehousing (-17k), leisure & hospitality (-12k), and temporary workers (-5k). In addition, while government hiring was off by only -5k in November, the anticipated spike in DOGE related job losses was the driver of October’s outsized negative print, as -162k federal government jobs were lost.
The unemployment rate rose to 4.6% versus a consensus of 4.5%. This was driven by an increase in the participation rate from 62.4% to 62.5%. Since September, the number of employed persons rose modestly -- less than +100k -- while the number of unemployed rose by +229k. However, average hourly earnings slowed in the month, up only +0.1%, and +3.5% year-over-year. Encouragingly, hours worked rose in November to 34.3, indicating that activity may not be as slow as the low hiring environment might indicate – and likely the driver of the muted wage growth.
Looking ahead to the January Fed meeting, this data will be part of the puzzle, but the Fed should benefit from more up-to-date assessments of the economy by the time the meeting convenes. In addition, while +22k average monthly job gains over the last three months corroborate the view that the labor market is softening, there is little in the data released today to support the notion that the employment situation is deteriorating rapidly. Our view remains consistent – at least one more cut in the first part of 2026, and perhaps more later in the year dependent on the selection of the next Fed chair and the economic backdrop.
Markets were mixed at the open on today’s news. Equity investors could find comfort in the combination of the slight upside in the November payrolls as well as a reasonably strong retail sales report for October which showed the control group up +0.8% – a good start to the critical quarter for retail. However, with over a month until the next Fed meeting, it’s perhaps not surprising to see equities soft going into today’s session on the lackluster average job gains – even as the 10 Year Treasury yield moves slightly higher.
