Early chill for employment

December 16, 2025

The Bureau of Labor Statistics (BLS) released employment data for both October and November today. The government shutdown, coupled with layoffs and hiring freezes earlier in the year, added to staffing shortages at the BLS. Staff is down about 25% from the start of the year. Field offices were hardest hit.

Those shifts and delays in the surveys for November means we are getting a truncated view of the labor market at the height of the government shutdown. That means the data is useful but not as complete as it could be; it needs to be taken with a grain of salt. Federal Reserve Chairman Jay Powell made a similar point during the press conference following the contentious decision to cut rates for a third consecutive meeting on December 10.

The payrolls report revealed that we shed 41,000 jobs in October and November, after September and August were both revised down. Public sector payrolls shed 162,000 jobs alone; some 151,0000 workers who took earlier buyouts fell off the federal payrolls on October 1. Federal workers who were either furloughed or forced to work without pay during the shutdown were paid in arrears; they do not count as job losses in the official data. The ramp-up in hiring by the Department of Homeland Security was not enough to offset those losses.

State and local governments added an almost imperceptible 6,000 jobs during the two months, after downward revisions to September. A shortfall in tax revenue and funding cuts by the federal government are hurting state and local finances and triggering layoffs. Education was among the hardest hit.

Private sector jobs added 121,000 jobs during the two months, which is much stronger than it was over the summer. Healthcare and social assistance accounted for more than those gains by adding 129,000 to the total for the two months. That reflects aging demographics and the surge in demand for child- and in-home eldercare services.

Curbs on immigration have limited employment gains in the care economy and pushed up costs dramatically. That means more workers are being forced to provide unpaid care or drop out of the workforce entirely. The gender split on those providing unpaid eldercare for a family member is more evenly divided than that for childcare; young men (15-34) dominate unpaid eldercare, which could be why the ranks of young men participating in the labor market remain subdued.

Service sector jobs outside of healthcare and social assistance were broadly weaker. The largest add outside of healthcare occurred in professional business services with only 5,000 jobs, well within the margin of error for zero. The gains were concentrated in architectural, engineering and related services, which are being buoyed by the boom in AI infrastructure.

Leisure and hospitality remained muted as flight cancelations due to the government shutdown disrupted gains during the two months. Retail added only 3,800 jobs for the two months. A later- than-usual Thanksgiving shifted much of the holiday shopping season into December, much as we saw a year ago. That should result in a surge in seasonal hires in December instead of November. Brace for a jump in hiring for December. Last year, December 2024 was the strongest month of the entire year. We expect the same in December 2025.

The goods sector added 10,000 jobs over the two months. Those gains continued to be dominated by construction, mostly in data centers and office conversions. Nonresidential specialty contractors dominated construction gains. The number of jobs with residential specialty contractors fell, while those for building construction rose modestly.

Manufacturing and mining continued to shed jobs. Manufacturing shed 14,000 over the two months. Losses were broad-based. The largest exception was fabricated metals. The jobs we are losing due to higher input costs via tariffs have outstripped the jobs we are saving in the steel industry.

Manufacturing employment has fallen for seven straight months and remains in recession territory. Data on producer prices earlier in the month revealed that margin compression in the vehicle sector has been particularly acute due to tariffs. Layoffs gained steam in October and November.

Mining and logging shed 3,000 jobs. Lower oil prices, coupled with tariffs on steel and equipment, have pushed oil prices below break-even levels for additional drilling.

Average hourly earnings rose a combined 0.6% in October and November. That brought the average in November down to a 3.5% gain from a year ago, compared to 3.7% in September. Hours worked increased 0.1 of an hour over the two months.

Wages for nondurable goods manufacturing increased 1.1% during the two months. That includes areas dominated by immigrant labor such as food processing. Wages for utility and information jobs are accelerating in response to the boom in data centers. The war for AI talent is boosting wages but not employment in the information sector. Wholesales wages remained tepid, along with those for mining and logging.

That suggests that the labor market continued to cool, which tracks with private sector wage data. The premium for job hopping has narrowed considerably over the last two years.

Household survey reveals more weakness

Separately, the household survey revealed that the unemployment rate continued to edge higher, hitting 4.6% in November, up from 4.4% in September. That is the highest unemployment rate since September 2021. Participation in the labor market rose, with women rejoining the labor force. Prime-age women’s participation hit the second highest level on record. Men’s prime-age participation increased as well.

We have entered the peak years for baby boomers aging 65 and retiring. Many companies are riding that attrition wave to hold labor costs in check. The participation rate for the over-65 crowd stayed flat from September. Younger baby boomers started to tap Social Security benefits early this year, for fear of losing them later. Many may still be working to make ends meet.

The ranks of those out on vacation hit 1.64 million, which is within the range of normal for the month. People caught up on travel after the shutdown ended. Affluent households continue to drive travel and pay up for fly first class, while a surge in tax refunds next year should buoy travel during spring break.

Those out due to parental leave hit 462,000, which is the highest November since record keeping began 2003. Parental leave was expanded during the pandemic. Births, which many wrongly conflate with fertility rates, have risen post-pandemic. A record number of Gen Z and millennials are aging into their peak household forming years.

Those forced to accept part- instead of full-time work due to economic conditions rose a stunning 26% during the two months to 5.35 million in November. The largest increase was among those who could only find part-time work; those numbers reached the highest level since March 2018.

The ranks of the long-term unemployed (more than 27 weeks) jumped to 5.3% to 1.91 million. That is slightly below the high-water mark for the year: 1.93 million in August. The silver lining is that the mean duration of unemployment fell slightly.

The broader U6 measure of unemployment rose to 8.7%, its highest level since August 2021. That includes those marginally attached to the labor force and those having to accept part-time work due to economic conditions. Teenage unemployment jumped to its highest outside of the pandemic since September 2021; Black teens carried those increases, with unemployment hitting 30.7%, the highest outside of the pandemic since June 2016.

Reentrants to the labor market added to the rise in unemployment. Job losers on temporary layoffs also soared. The spillover effects of the government shutdown on contractors and communities likely contributed to the rise in temporary layoffs.