The employment report for November and October showed that the private sector continued to add jobs at a modest pace that is probably close to its new trend — with private payrolls up by 52,000 in October and 64,000 in November. But government payrolls dropped sharply in October (down by 157,000) mostly from workers who had taken the Trump Administration's buy-out from earlier in the year. The November government payrolls were down by only -5,000, showing the one-time impact of the buy-out. The 3-month average of private payrolls moved up to 75,000 in November, but for all payrolls (including the government sector) it rose to only 22,000 (after a negative reading in October). In coming months, they should move closer together as the one-time October impact moves into the past.
The household survey was not undertaken for October given the federal government shutdown, and so for the first time since this survey was started in 1948, there was no data for that month. The November data, however, showed that the U-3 unemployment rate climbed to 4.6 percent — a bit above what most analysts (including those at the Fed) would consider the full unemployment rate (but note that the broader U-6 rate jumped to 8.7 percent). Employment in this survey was nearly 100,000 above the September figure — with the implied two-month change similar to that of the payroll survey.
Taking both surveys together, it appears that the job market continues to expand, although clearly at a slower pace than at any time since the Covid downturn. Importantly, with the relative stability of private sector employment, the job market is probably not getting worse (as also shown by the weekly unemployment claims). These data give modest support for Fed easing, with the unemployment rate moving a bit higher (especially the U-6 rate). But Thursday's CPI release for November will give updated data on that side of the Fed's two-sided goal. If that data show that inflation remains stuck at around 3.0 percent (or worse, a move upward), a pause in the Fed's easing is likely. On the other hand, if the trend CPI data show that inflation moved a bit lower, markets will increase expectations for further easing in the near-term.
David W. Berson, Ph.D., CBE
Chief Economist
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