U.S. job growth rebounded more than expected in November, easing fears that the labor market is sliding into a more serious downturn after a sharp October decline tied largely to government-related spending cuts. The improvement suggests there has been no material deterioration in employment conditions, even as businesses grapple with economic uncertainty stemming from President Donald Trump’s aggressive trade policies.
According to the Labor Department’s closely watched employment report released Tuesday, nonfarm payrolls increased by 64,000 jobs in November. That followed a steep loss of 105,000 jobs in October, the largest monthly decline since December 2020. The October drop was driven primarily by a reduction of 162,000 federal government jobs, the biggest pullback in government employment since June 2010.
The report also showed the unemployment rate rising to 4.6% in November, the highest level in more than four years. However, economists urged caution in interpreting that figure. The Bureau of Labor Statistics changed its methodology after a 43-day government shutdown disrupted data collection from households, which is used to calculate the unemployment rate. For the first time since the series began in 1948, no unemployment rate was published for October.
The BLS warned that standard errors around the November household survey would be “slightly higher” than usual. Economists said those technical issues likely distorted the data and overstated labor market weakness, according to Reuters.
As a result, analysts have focused more closely on private-sector job growth. Private employment has averaged about 75,000 jobs per month over the past three months, a pace many economists believe is consistent with stable labor market conditions.
“The firmer private sector employment figures support the Fed taking a pause in its rate-cutting cycle for some period,” said Kathy Bostjancic, chief economist at Nationwide. “The unemployment rate … should be taken with a large grain of salt since the disrupted normal collection of the household survey data due to the government shutdown distorted the data readings and is associated with higher-than-usual standard errors.”
Federal government employment fell by another 6,000 jobs in November and is now down by 271,000 positions since peaking in January. Employees who accepted deferred buyouts as part of the Trump administration’s effort to shrink the federal workforce received their final paychecks in September. Payrolls were not affected by furloughs during the shutdown because workers were retroactively paid once the government reopened. However, President Donald Trump, in a post on Truth Social.
Within the private sector, job gains became more broadly distributed, though healthcare continued to lead. The sector added 46,000 jobs, spread across hospitals, ambulatory care, and nursing and residential facilities. Construction payrolls rose by 28,000 jobs, while social assistance employment increased by 18,000. Transportation and warehousing employment declined by 18,000 jobs, reflecting losses among couriers and messengers.
Overall job growth has been little changed since April. Economists say employers have grown cautious amid what some describe as shock from Trump’s sweeping import tariffs. Higher import duties have pushed up prices on many goods, prompting consumers, particularly lower- and middle-income households, to scale back spending. That slowdown was echoed in separate data from the Commerce Department, which showed retail sales were flat in October after a modest 0.1% increase in September.
Technical factors also played a major role in November’s unemployment rate. The BLS said the shutdown may have led some federal workers to report themselves as unemployed during the survey period. “The BLS makes no effort to try to ‘correct’ individual responses,” said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets.
“The level of government workers in the household survey plunged by 503,000 from September to November. I would not be surprised to see the unemployment rate slip back in December.” The Federal Reserve cut interest rates by 25 basis points last week but signaled further cuts are unlikely in the near term. Fed Chair Jerome Powell said the labor market “seems to have significant downside risks,” while officials wait for clearer signals on jobs and inflation.
Wage growth is already cooling. Average hourly earnings rose 3.5% year over year in November, the smallest gain since May 2021. While that may help ease inflation, it could also weigh on consumer spending. As Citigroup economist Gisela Young put it, “Consumer spending has generally been resilient, but further weakening in the labor market continues to be a key downside risk.”
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