Workforce whiplash

The jobs report arrived fashionably late, and unfortunately it did not dress to impress.

Payrolls rose by 64,000 in November, slightly above expectations, but the unemployment rate climbed to 4.6%, the highest since 2021 and above forecasts.

Heather Long, chief economist at Navy Federal Credit Union, told CNBC that the data points to a “jobs recession,” noting that nearly 70% of all new jobs came from healthcare, an industry that “is almost always hiring due to America’s aging population.”

The details behind the data

While today’s numbers weren’t great, investors weren’t too perturbed: Everyone was expecting this to be a weird report.

The government shutdown forced the Bureau of Labor Statistics to cancel the October report and merge it with November’s, skewing the unemployment rate and masking a one-time drop in government jobs. “The Fed is unlikely to put much weight on today’s report given data disruptions,” Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management, told CNBC.

Stagflation station

The government shutdown muddied the waters this month, but if we broaden the lens a bit, the labor market doesn’t look very healthy.

Revised jobs numbers revealed that 11,000 fewer people were hired in September than originally believed, and the number of lost jobs in August rose from 4,000 to 26,000. The US economy has now added an average of 55,455 jobs per month this year, putting it on pace for the worst year for the labor market since 2020.

The economy is sliding toward stagflation, defined by both high unemployment and stubborn inflation. CPI rose 3% year over year in September, well above the Fed’s 2% goal, leaving policymakers trapped: cutting interest rates risks reigniting inflation, while tightening would further weaken an already fragile labor market.

Warning signs are starting to pile up:

• Supply disruptions: President Trump’s aggressive tariffs are pushing up costs across the economy. Companies are feeling the heat: Business activity in December grew at the slowest pace in six months, and input costs hit a three-year high.
• Demand disruptions: A CNBC Survey shows 41% of consumers plan to spend less on the holidays, and nearly half blame high prices, a 10-point increase from last year.
• Policy uncertainty: Trump continues pressuring the Fed for deeper rate cuts, even after three consecutive cuts since September. With a new Fed chair coming in May, political pressure to keep easing could undermine the Fed’s independence and worsen stagflation risks.

Markets remain cautious after today’s news, and investors now think there’s only a 24.4% chance of a January rate cut as the Fed remains stuck between a rock and a hard place.—SY