Core Data at a Glance

  • Data released by the U.S. Bureau of Labor Statistics (BLS) on Tuesday showed that the unemployment rate rose to 4.6% in October, the highest level in more than four years, mainly due to the federal government layoffs announced in the spring beginning to take effect.
  • Federal government employment fell by 162,000 in October and by another 6,000 in November. Meanwhile, construction employment increased by 28,000 in November, and the healthcare sector added 46,000 jobs. Because the October government shutdown disrupted data collection, this report covers employment data for both months. The unemployment rate in September was 4.4%.
  • "The low-layoff, low-hiring labor market landscape remains unchanged, with the unemployment rate continuing to climb," said Joe Brusuelas, chief economist at RSM US, in the report. "The simultaneous slowdown in hiring and wage growth will bring a bleak end to what has already been a weak year for the U.S. economy."

In-Depth Analysis

The rise in the unemployment rate and increasing signs of a softening labor market supported the Federal Reserve's decision on December 10 to cut its key interest rate by 25 basis points to a range of 3.5% to 3.75%.

Brusuelas noted: "The employment data likely confirms the judgment of Fed officials who support rate cuts."

Fed Governor Stephen Miran dissented from the rate cut decision, advocating for a 50-basis-point reduction and pointing to a cooling labor market. Meanwhile, two other policymakers opposed the cut because inflation remains above the 2% target, arguing for holding rates steady.

According to the Fed's median projections, central bank officials expect the federal funds rate to be cut by only another 25 basis points in 2026. They project that their preferred inflation gauge—the personal consumption expenditures (PCE) price index excluding volatile food and energy prices—will fall back to 2.5% by the end of 2026.

However, the latest labor market data did not change futures traders' bets on the future path of interest rates.

Brusuelas cautioned: "It is best not to overinterpret these data, as the initial figures for the two months are likely to be revised later."

He added: "An important signal is that hiring and wage growth have slowed as the holiday shopping season approaches, indicating that economic growth will weaken in the final months of the year."

BLS data showed that average hourly earnings rose by 0.1% month-over-month in November, slowing from the prior month, with a year-over-year increase of 3.5%.

Weak wage growth was also reflected in retail sales: October retail sales were flat month-over-month, while September saw a 0.1% increase.

Data released by the U.S. Census Bureau on Tuesday showed that U.S. retail sales growth slowed this fall, further confirming recent signs of economic cooling. The report, delayed due to the recent government shutdown, showed that retail store sales were flat month-over-month in October, while September saw a 0.1% increase.