The delayed November employment report landed Wednesday, and it confirms what economists have suspected for months: the labor market is cooling faster than the Federal Reserve anticipated. Unemployment climbed to 4.6%—the highest level since early 2021—while payroll growth of just 64,000 undershot already-modest expectations.

The report, delayed by the 43-day government shutdown, paints a picture of a job market that's not collapsing but is clearly losing momentum.

The Numbers That Matter

November nonfarm payrolls increased by 64,000, slightly above the 40,000 consensus forecast but well below the pace needed to keep up with population growth. More concerning: October's initially reported figure was revised sharply lower, suggesting the labor market softened earlier than previously understood.

The unemployment rate's jump from 4.4% to 4.6% caught some forecasters off guard. While a single month doesn't make a trend, the direction is unmistakable—the jobless rate has risen a full percentage point from its 2023 lows.

What's Driving the Slowdown

Several factors are converging to cool hiring:

  • Interest rate effects: The Fed's rate hikes are finally biting, with rate-sensitive sectors like housing and manufacturing showing particular weakness
  • Tariff uncertainty: Companies are hesitant to add headcount when import costs remain unpredictable
  • Immigration shifts: Changes to immigration policy have tightened labor supply in some sectors while reducing overall workforce growth
  • AI displacement: Early signs suggest automation is beginning to affect white-collar hiring, particularly in tech

Fed Implications

The weak jobs data arrives at a critical moment for monetary policy. The Fed just cut rates to 3.5%-3.75% and signaled a cautious approach to further easing. Fed Governor Christopher Waller noted Wednesday that "the jobs market is very soft" and current payroll growth is "not good."

Markets are now pricing higher odds of continued rate cuts in 2026, though the Fed has signaled it wants to see more data before committing to an aggressive easing path.

Silver Linings

Not everything in the report was negative. Average hourly earnings held steady, suggesting employers aren't yet in panic mode. The labor force participation rate remained stable, indicating workers haven't given up looking for jobs.

And importantly, 4.6% unemployment—while elevated from recent lows—remains historically low by pre-pandemic standards. This is a cooling labor market, not a collapsing one.

The Bottom Line

November's jobs report confirms the soft landing is getting softer. For investors, the data supports the case for a more accommodative Fed in 2026—but also raises the stakes for tomorrow's CPI report. If inflation remains sticky while unemployment rises, the Fed faces an uncomfortable choice between fighting prices and supporting growth. Stay tuned.