United States: Employment Plunges in October, Modest Rebound in November

These October and November figures were widely anticipated. We now know that total employment fell by 41,000 over the two-month period. This is hardly surprising. October’s sharp decline was largely expected, as it reflects the delayed impact of last winter’s DOGE spending cuts. Federal employees affected by those cuts continued to receive pay until the end of September. There were 162,000 fewer federal workers in October compared to September, and another 6,000 lost in November. Private-sector employment fared better, with gains of 52,000 in October and 69,000 in November. Still, this pace is slower than the monthly average of 130,000 in 2024 or 100,000 during the first three months of 2025. In short, job creation remains relatively subdued even when excluding federal government volatility. The much-touted resurgence of US manufacturing promised by President Trump has yet to materialize: the sector shed 9,000 jobs in October and another 5,000 in November. Unless there is a dramatic turnaround, manufacturing employment is on track for two consecutive years of decline—a first since the Great Recession. Among other sectors, November saw job losses in wholesale trade, retail, transportation and warehousing, information, finance, temporary help services, and hospitality.

The federal shutdown will leave a lasting mark on household survey data. No figures will be published for October, as the survey cannot be conducted retroactively. For November, the unemployment rate climbed to its highest level since September 2021—and, excluding the pandemic, since January 2017. Compared to September, household data show an increase of 96,000 jobs, which is better than the signal from the establishment survey. The rise in unemployment stems from faster labour force growth, up 323,000 over two months. The participation rate edged up from 62.4% to 62.5%. The broader measure of unemployment paints an even bleaker picture, jumping from 8.0% to 8.7%—the largest two-month increase since December 2008. The budget impasse and its spillover effects may have amplified this surge. December data, due January 9, will provide more clarity.

On retail sales, results landed between consensus expectations and our own forecast. As anticipated, the auto sector was a significant drag, but sales excluding autos performed better than expected, signaling positive momentum at the start of the fourth quarter. Thursday’s CPI release will be key to assessing how price changes affected nominal sales, particularly for online purchases, where tariffs have risen following the end of the small-transaction exemption.

Employment trends in October and November were broadly in line with our expectations and consistent with the narrative outlined by the Fed in last week’s decision. The next question is how conditions will evolve once the disruptions from the budget standoff subside. January’s data will shed more light.