The United States labour market witnessed a significant downturn in November, with the unemployment rate climbing to its highest level since 2021. The latest data, delayed due to a prolonged government shutdown, reveals a complex economic landscape marked by federal workforce reductions and cautious corporate hiring.
November Jobs Report: A Mixed Bag Amid Federal Cuts
The US economy added 64,000 jobs in November, a figure that surpassed economists' predictions of 40,000. However, this modest gain follows a substantial loss of 105,000 positions in October. The primary driver behind October's steep decline was a significant reduction in the federal workforce, a move initiated under the Trump administration which saw approximately 162,000 government workers depart by the end of the fiscal year on September 30. This downsizing was notably influenced by directives from figures like Elon Musk, who advocated for slimming down government personnel.
The overall unemployment rate increased to 4.6% in November, marking a peak not seen in several years. This rise is a stark contrast to the 54-year low of 3.4% recorded in April 2023. The Labour Department's reports for September, October, and November were all delayed and released together on a Tuesday, following the resolution of a 43-day federal government closure. Due to the shutdown, the unemployment rate for October could not be calculated.
Underlying Economic Pressures and Corporate Hesitation
Beyond the immediate federal cuts, broader economic headwinds are stifling job growth. Official revisions also trimmed employment figures for August and September by a combined 33,000 positions. The pace of employment growth has slowed considerably, affected by lingering uncertainty surrounding President Trump's tariff policies and the delayed impact of the Federal Reserve's elevated interest rates from 2022-2023, which were implemented to control inflation.
Businesses across the nation are in a holding pattern. While many are maintaining their current staff levels, there is widespread hesitation to expand. Companies are grappling with dual challenges: the integration of artificial intelligence and automation, and adapting to the unpredictable nature of Trump's economic policies, particularly his substantial import tariffs.
"We've seen a lot of the businesses that we support are stuck in that stagnant mode: 'Are we going to hire or are we not? What can we automate? What do we need the human touch with?'" said Matt Hobbie, vice president of the staffing firm HealthSkil in Allentown, Pennsylvania, in comments to the Associated Press. He highlighted the cooling effect of automation in sectors like logistics and transportation, which are vital to regions like the Lehigh Valley in eastern Pennsylvania.
Federal Reserve's Dilemma and Policy Divisions
The concerning employment data has directly influenced monetary policy. Prompted by these worries, the Federal Reserve recently cut its benchmark interest rate by 0.25 percentage points, its third reduction this year. However, the decision was not unanimous, revealing deep divisions within the central bank.
Three Fed officials opposed the rate cut, marking the highest level of dissent in six years. The resistance stems from ongoing inflation that continues to exceed the Fed's 2% target. Of the dissenters, two officials advocated for holding rates steady, while Trump appointee Stephen Miran argued for an even larger reduction. This policy debate is further complicated by the delayed economic data, making it harder for officials to gauge the true health of the economy.
The situation presents a difficult environment for job seekers, as technological advancement threatens to reduce workforce requirements in several sectors. The combination of policy uncertainty, technological disruption, and the aftermath of a government shutdown has created a uniquely challenging period for the American labour market, with the November figures serving as a clear indicator of the pressures at play.
