Nonfarm Payrolls: Unemployment rate hits a 4-year high

Key takeaways

• The US jobs report for November showed an increase of +64,000 new jobs, coming in above expectations of +50,000.
• The unemployment rate increased to 4.6%, with the average hourly earnings slightly decreasing from +0.2 to +0.1% for the month.
• The November jobs report offered only a modest lift to sentiment, following a delayed release of October’s sharp decline. While the data eased some uncertainty, it pointed to uneven labor conditions rather than clear strength, and equity markets ultimately posted declines as expectations for a cautious policy outlook persisted.

What happened?

Alongside the November jobs numbers, which came in above expectations, downward revisions were made to the previous two months of reported data, subtracting a total of -33,000 jobs from August and September reports. The unemployment rate increased from 4.4% to 4.6% and the number of unemployed people increased from 7.6 million to 7.8 million. The labor force participation rate slightly increased from 62.4% to 62.5% and continues to remain below pre-pandemic levels of 63.4%. Within the household survey, average hourly earnings came in at +0.1% MoM and +3.5% on a YoY basis.

Average hours worked slightly increased to 34.3 hours per week. Payroll gains were seen across some sectors last month with healthcare registering the highest increases at +46,000 (driven by employment in ambulatory health services, hospitals and nursing and residential care facilities) followed by construction and social assistance which saw job gains of

+28,000 and +18,000 respectively. Job losses were seen in transportation and warehousing (-25,000) along with the Federal government which experienced a decline of -6,000 jobs this month, resulting in a cumulative loss of -271,000 positions since January. Employment in manufacturing, information and retail trade registered minor changes.

Job gains in November exceeded the current three-month average of 22,000, down from a previous three-month average of 51,000. The current three-month average marks a notable decrease from the three-month average of +182,000 registered in November 2024. Employment growth this year has been concentrated primarily in the healthcare while there have been significant job losses within the federal government.

What does it mean for investors?

November’s nonfarm payrolls report showed modest job growth following a newly released October estimate of a 105,000-job decline, delayed by last month’s government shutdown. Gains were led by health care, with smaller increases in construction and social assistance, while leisure and transportation posted losses and government employment continued to contract. Wage growth slowed and unemployment climbed to a four-year high, highlighting persistent labor market imbalances and reinforcing expectations for a more guarded policy approach. Revisions to prior months deepened signs of labor market softness, and markets now see limited scope for near-term rate cuts as policymakers weigh uneven hiring trends against cooling wage pressures. Futures are pricing in a 73% probability that rates remain unchanged in January, signaling expectations for the Fed to slow its pace of easing heading into the new year.

The latest Job Openings and Labor Turnover Survey (JOLTS) reported a slight increase from 7.65 million jobs in September to 7.67 million jobs in October (the November JOLTS report is due to be released on January 7). On the other hand, the ADP private payroll data reported a decrease of -32,000 jobs in November 2025 following an upwardly revised job gain of

+47,000 in October with annual pay at +4.4%. The labor market shows modest strength, with the payroll report signaling improvement while JOLTS and ADP data offer a mixed picture. Job openings remain broadly steady, though below earlier highs, and hiring slowed from September’s strong pace, reflecting uneven signals across indicators rather than a sharp deterioration. The Fed will continue to monitor upcoming datapoints (the next key data point released will be the November CPI number on December 18th) before delivering its next rate decision in January.

At the time of writing, both the S&P 500 and NASDAQ were trading in negative territory, down -0.60% and -0.46% respectively. On the fixed income front, yields declined across the curve, with the 2-Year Treasury yield falling to 3.48% and the 10-Year Treasury yield to 4.16%. Given mixed economic signals and lagging data, markets increasingly expect the Fed to keep rates unchanged in January, reinforcing a cautious policy stance. Our longer-term expectation remains for two additional rate cuts of 25bps each by the end of 2026.

Uneven labor trends and a higher unemployment rate will keep the Fed in a risk-mitigating mode, with a January hold still the most probable outcome along with a slower easing path ahead.