The Bureau of Labor Statistics (BLS) released its employment report for November, indicating a job growth of 64,000, which exceeded the Dow Jones estimate of 45,000. However, the unemployment rate rose to 4.6%, marking its highest level since September 2021. A broader measure of unemployment, which includes discouraged workers and those working part-time for economic reasons, increased to 8.7%, the highest since August 2021.

In addition to the November figures, the BLS provided a revised count for October, showing a decline of 105,000 jobs. This decrease was largely anticipated by Wall Street economists following an unexpected increase of 108,000 jobs in September. The October decline was primarily attributed to a significant reduction in government employment, with a loss of 162,000 jobs, and an additional decrease of 6,000 jobs in November.

This October decline represents the third instance of net negative payrolls in the past six months. The BLS also revised August's job numbers downward by 22,000, indicating a more substantial loss of 26,000 jobs, while September's initial count was adjusted down by 11,000.

The BLS noted that the household survey, which is used to calculate the unemployment rate, will be affected for several months due to the impacts of the government shutdown. The challenges in capturing the October data led to the cancellation of both the jobs report and the consumer price index.

The report reflects a labor market characterized by low hiring and low firing rates, influenced by stringent immigration policies under the Trump administration that have reduced the typical influx of workers. In November, the majority of job gains were concentrated in the health care sector, which added 46,000 jobs, accounting for over 70% of the total increase. Other sectors such as construction and social assistance added 28,000 and 18,000 jobs, respectively.

Conversely, the transportation and warehousing sector experienced a loss of 18,000 jobs, continuing a trend of job reductions in that area, while leisure and hospitality saw a decrease of 12,000 jobs.

From a policy perspective, the Federal Reserve is navigating the complexities of maintaining labor market stability while addressing persistent inflation. In its recent meeting, the Fed lowered its key interest rate by a quarter percentage point but indicated that further cuts would require stronger justification. Since September, the Fed has implemented three consecutive rate reductions, bringing the target range to 3.5%-3.75%.

Market expectations for another rate cut in January remain low, with a probability of approximately 24.4% following the jobs report, unchanged from the previous day. Fed officials have asserted that the labor market is not a contributing factor to inflation, a position supported by the latest jobs report, which showed average hourly earnings rising by only 0.1% for the month, below the anticipated 0.3%, and an annual increase of 3.5%, the smallest since May 2021. The slight uptick in the unemployment rate was primarily due to labor force growth, with household employment increasing by 407,000 over the two-month period, offset by a rise of 323,000 in the labor force, leading to a participation rate of 62.5%.