The U.S. labor market showed further signs of fragility in November, with unemployment climbing to its highest level in over four years even as payrolls posted a modest, better-than-expected gain. The delayed report from the Bureau of Labor Statistics revealed a mixed picture: job growth of 64,000 for the month contrasted with a steep 105,000 decline in October and an unemployment rate that rose to 4.6%.

A broader measure of underemployment surged to 8.7%, its highest point since August 2021. October’s sharp drop was driven largely by a loss of 162,000 government jobs as deferred layoffs took effect, marking the third net payroll decline in the past six months. Revisions also showed deeper losses for August and September.

Sectoral Split and a “Jobs Recession”

Job gains remained highly concentrated. Healthcare added 46,000 positions in November, accounting for over 70% of the net increase—a continuation of a long-running trend fueled by demographic shifts. Construction and social assistance also saw gains, while transportation/warehousing and leisure/hospitality posted losses.

"The U.S. economy is in a jobs recession," said Heather Long, chief economist at Navy Federal Credit Union. "The nation has added a mere 100,000 jobs in the past six months."

Wage Growth Cools, Easing Inflation Concerns

In a silver lining for the Federal Reserve, wage pressures continued to moderate. Average hourly earnings rose just 0.1% monthly and 3.5% annually—the smallest yearly increase since May 2021. This supports the Fed's stance that the labor market is not fueling persistent inflation, a key consideration as it balances support for employment against price stability.

The unemployment rate increase was partly due to a growing labor force, with participation inching up to 62.5%. Household employment actually rose by 407,000 over the two-month period, though it was outpaced by labor force growth.

Policy Outlook: A Cautious Fed

The Fed, which has cut rates three times since September, is expected to treat the delayed and distorted data with caution. "The Fed is unlikely to put much weight on today’s report given data disruptions," said Kay Haigh of Goldman Sachs Asset Management, noting that December's report in early January will be more influential for near-term policy.

Markets are skeptical of further near-term easing, pricing only a 24.4% chance of a January rate cut. The central bank's delicate balancing act—supporting a softening labor market without reigniting inflation—remains complicated by structural factors like reduced immigration and sector-specific weaknesses.

While the White House hailed "a strong, America First economy," the underlying data depicts a cooling job market where gains are narrow, volatility is elevated, and broader measures of labor slack are widening—a combination likely to keep policymakers on guard heading into 2026.