U.S. job growth rebounded more than expected in November after government spending cuts in October triggered the biggest decline in nonfarm payrolls in nearly five years. This suggests that labor market conditions have not deteriorated significantly as businesses cope with the economic uncertainty caused by President Donald Trump’s aggressive trade policies.
While the Labor Department’s closely watched jobs report on Tuesday showed the unemployment rate was at more than a four-year high of 4.6% last month, the Bureau of Labor Statistics changed its methodology after the 43-day government shutdown prevented it from collecting data from households.
The unemployment rate is calculated from the household survey. For the first time since the government began collecting the data series in 1948, no unemployment rate was released for October. The BLS warned Monday that standard errors in November’s household survey results would be “slightly higher” than usual.
Economists said they are focusing on private job growth to get a better sense of the health of the labor market. Private employment growth averaged 75,000 jobs per month over the past three months, which some economists say should allow the Federal Reserve to leave interest rates unchanged in January.
“More stable private sector employment numbers suggest the Fed is taking some pause in its rate-cutting cycle,” said Kathy Bostjancic, chief economist at Nationwide. “The unemployment rate… should be viewed with caution as the interruption of normal collection of household survey data due to the government shutdown distorted the data values and is associated with higher than average standard errors.” Nonfarm payrolls rose by 64,000 jobs last month. The economy shed 105,000 jobs in October, the largest decline since December 2020. This decline was coupled with a decline of 162,000 jobs in federal employment, the largest decline since June 2010.
Employees who took advantage of deferred buyouts as part of the Trump administration’s efforts to reduce government influence received their final paychecks in September.
Payrolls were not impacted by the furloughing of workers during the shutdown, as they were paid retroactively when the government reopened. Federal employment fell by 6,000 jobs and has fallen by 271,000 since its peak in January.
The range of private job gains improved last month, although the health care sector continued to dominate, adding 46,000 jobs spread across home health services, hospitals, nursing and care facilities. Construction employment increased by 28,000 jobs. The number of social welfare employees increased by 18,000.
However, employment in transportation and warehousing fell by 18,000 jobs, reflecting job losses among couriers and messengers.
Job growth has barely changed since April. Economists say employers have pulled back from hiring because of Trump’s sweeping import tariffs, which some described as a shock.
Import tariffs have increased the prices of many goods, causing consumers, particularly low- and middle-income households, to be more selective about their purchases and ultimately restrain their spending. That trend was reinforced by a separate report from the Commerce Department’s Census Bureau that showed retail sales were flat in October after rising 0.1% in September.
Trump, who won the 2024 presidential election on a promise to curb inflation, has in recent weeks alternately dismissed affordability problems as a joke, blamed former President Joe Biden and promised that Americans will benefit from his economic policies next year.
Stocks on Wall Street were trading lower. The dollar fell against a basket of currencies. US Treasury yields fell.
TECHNICAL FACTORS INFLUENCED THE UNEMPLOYMENT RATE
The unemployment rate in November was the highest since September 2021. It was 4.4% in September. Because the shutdown ended during the collection period for the November jobs report, some federal workers may have filed for unemployment, economists said.
“The BLS makes no effort to ‘correct’ individual responses,” said Stephen Stanley, chief U.S. economist at Santander US Capital Markets. “The number of state employees in the household survey fell by 503,000 from September to November. I wouldn’t be surprised if the unemployment rate fell again in December.”
Given the lack of data for October, the BLS said that “the composite weighting formula was adjusted by moving previously collected data forward by one month.”
It also said the response rate was lower than usual at 64% and noted that the collection process started late due to the shutdown, which contributed to slightly higher standard errors than usual.
“The unemployment rate in November required a change of 0.26 percentage points to be statistically significant, compared to a required change of 0.21 percentage points in September,” it said.
The statistics agency said Monday that twice as many new households would take part in the November household survey than in a typical month, while others would return after a break in the middle of their registration period, creating what economists call a rotation bias.
“After accounting for technical issues, we still think the unemployment rate has increased, but only slightly,” said Michael Feroli, chief U.S. economist at JP Morgan.
Last week, Fed officials cut the federal funds rate by another 25 basis points to the range of 3.50% to 3.75%. However, they signaled that borrowing costs were unlikely to fall further in the near term as they awaited clarity on the trajectory of the labor market and inflation. Fed Chairman Jerome Powell told reporters in a post-meeting news conference that the labor market “appears to have significant downside risks,” alluding to a preliminary benchmark revision estimate in September that suggested 911,000 fewer jobs were created in the 12 months through March than previously reported, representing 76,000 fewer jobs per month.
The BLS will release the final revision of the payroll benchmarks in February along with the January employment report. The release of the January report said it would effectively change the birth-death model by incorporating current sample information each month. Using the model, the BLS attempts to estimate how many jobs were gained or lost in a given month as a result of businesses opening or closing.
“The change follows the same methodology applied to the April-October 2024 forecasts in the 2024 post-benchmark period,” the BLS said.
The slowdown in the labor market was reflected in a slowdown in wage growth. Average hourly wages rose 3.5% in the 12 months to November, the smallest year-on-year increase since May 2021, after rising 3.7% in October. While this could boost the fight against inflation, it could also pose a headwind for consumer spending.
“Consumer spending has been generally robust, but further weakening in the labor market remains a material downside risk,” said Gisela Young, an economist at Citigroup.
Published on December 17, 2025