Unemployment rate rises, signaling weakness in the economy
The economy is flashing new warning signs, as the U.S. labor market shed jobs over October and November, and the unemployment rate ticked up to 4.6 percent, the highest level since 2021.
A hiring sign at a Target in Manhattan last month. (Spencer Platt/Getty Images)
Job gains of 64,000 in November exceeded expectations but only partially offset the loss of 105,000 jobs in October. Those losses, the sharpest since the covid pandemic-era recession, reflected the exit of tens of thousands of federal workers who took a deferred resignation package earlier this year.
The long-awaited jobs report by the Labor Department was delayed because of the federal government shutdown, creating headaches for economists and policymakers trying to assess how fast the labor market slowed this fall, as President Donald Trump’s economic policies, including higher tariffs and immigration enforcement, continue to take hold.
Also, job creation in August was revised down by 22,000, showing the economy shed 26,000 jobs that month. September job gains were also revised lower by 11,000 to 108,000.
“Today’s report showed overall stagnant growth,” said Nicole Bachaud, labor economist at ZipRecruiter. “This really points to the challenges in the policy landscape that businesses are going up against, tariffs, geopolitical uncertainty, inflation that’s staying really stubborn.”
The unemployment rate has risen this year, from 4 percent in January to 4.6 percent in November, as more Americans, some of whom are reentering the labor market, struggle to find opportunities. The unemployment rate rose sharply for African Americans and teenagers. Rising unemployment for those groups often serves as a bellwether for a broader economic downturn.
“The fact that the unemployment rate has gone up [so much] adds to the realization of what we’re seeing in consumer attitudes that even as the economy grows, most Americans don’t feel very good about it,” said Diane Swonk, chief economist with the tax and accounting firm KPMG.
The report does not contain the unemployment rate for October because the government could not collect survey data during the shutdown, a first for the agency since the survey began in 1948.
Some economists have noted that there is little evidence that U.S.-born workers are picking up jobs abandoned by immigrants who have left the country.
Wall Street appeared to mostly brush aside the jobs data as stale news, with major stock indexes wavering midmorning between minor gains and losses.
Health care continued to lead jobs gains in November, adding 46,000 positions. Construction payrolls grew by 28,000 jobs and social assistance added 18,000 positions. But transportation and warehousing and federal government payrolls lost jobs in November.
Since January, the federal government has lost 271,000 jobs, with more than half of those losses registered in October.
The manufacturing sector also shrank in November under the weight of tariffs and has lost jobs most months this year, even as the Trump administration argues that its trade war will revive American manufacturing. Leisure and hospitality, which has helped buoy the labor market this year, shed positions, as consumers have pulled back on discretionary spending.
The labor market has been softening since June, with hiring sputtering to near the lowest level in more than a decade and the unemployment rate rising. Headwinds including tariffs, inflation and cautious consumer spending have prompted employers to suspend hiring. Meanwhile, some white-collar employers have laid off employees or announced cuts this fall, especially amid the growth of artificial intelligence, which employers can use to replace jobs. Still, filings for unemployment insurance, the closest to a real-time gauge for layoffs in the broader economy, remain low, although they ticked up last Thursday.
“Businesses need certainty when they go and make their hiring decisions and their investment plans, and when there’s uncertainty in the economy, it just makes things harder,” said Sam Kuhn, an economist with the recruitment software company Appcast.
The report buttressed the Federal Reserve’s decision to cut interest rates last week, for the third time this year, because of a softening labor market. Federal Reserve Chair Jerome H. Powell warned that official statistics could be overstating job creation by 60,000 jobs a month, calling jobs data “a complicated, unusual and difficult situation.”
But so few people are entering the labor market, in part because of the Trump administration’s immigration enforcement, that the economy no longer needs to pump out hundreds of thousands of jobs a month to keep the unemployment rate steady. Economists say it’s possible that creating around 50,000 jobs a month could keep the unemployment rate stable.
“The unemployment rate would be much higher right now without the absence of immigrants that we’re seeing and the loss of participation of older workers retiring,” said Swonk, the KPMG economist.
A number of high-profile layoffs this fall have fueled unease about the state of the labor market. The rate of layoffs rose substantially in October, a separate jobs report released by the Labor Department on Monday showed. But preliminary estimates from the Cleveland Federal Reserve show that around 20,000 Americans in 16 states received layoff notices in November through the Warn Act, a significant decrease from about 36,000 reported in October for the same states.
In another sign of labor market fragility, the number of Americans working part-time who would prefer full-time work surged by more than 900,000 from September to November.
And the number of Americans who have been unemployed for less than five weeks jumped to 2.5 million in November, the highest level since 2020.
“If you’re a worker that just freshly got laid off or are looking for new work, there’s not a lot of companies hiring right now,” Kuhn said.
