The US unemployment rate is now at its highest since the pandemic, but the White House says, “the best is yet to come.”
The disparity between the facts and their interpretation highlights how the 43-day shutdown of the US government, during which the Bureau of Labor Statistics (BLS) ceased collecting data, has left the reliability of the much-anticipated, and much delayed, jobs report for October and November open to question and interpretation.
What is undeniable, however, is that an unemployment rate that started the year at 4 per cent, when Donald Trump regained the presidency, is now at 4.6 per cent and has been creeping up in 10 basis points increments since mid-year. The US has lost more than 270,000 jobs this year.
The White House seized on an increase in private sector jobs in November, where 64,000 jobs were added, as a sign of progress, even as the unemployment rate rose to its highest level in more than four years and the number of people working part-time while wanting full-time employment rose to 8.7 per cent, a percentage point higher than at the same time last year. The unemployment rate for black Americans, at 8.3 per cent, is the highest since 2021.
The overall numbers aren’t positive for the White House or the economy because they include the delayed impact of Elon Musk’s Department of Government Efficiency’s purge of the federal workforce. In October, 162,000 federal employees who took a deferred resignation package earlier in the year, under extreme pressure from DOGE, were included in the jobs data.
Over the two months the unemployment rate rose from 4.4 per cent in September to 4.6 per cent last month.
The actual numbers might be worse.
The BLS revised down the number of jobs created in August by 22,000, which means the US lost 26,000 jobs that month, while also cutting 11,000 jobs from the 119,000 jobs previously thought to have been added in September.
Moreover, the Federal Reserve Board chairman, Jerome Powell, said last week that jobs numbers were probably being over-estimated by around 60,000 a month because of out-dated collection methods, in which case the state of the jobs market would be even weaker.
It is a positive that the private sector is still adding jobs, although those jobs are concentrated in the private education and healthcare sectors while manufacturing sector employment is shrinking. Trump’s tariff-driven attempt to revive US manufacturing and manufacturing jobs has yet to gain any traction.
The jobs data also doesn’t reflect the lengthening queue of private sector employers – Amazon, Verizon, Microsoft, UPS, the auto companies, retailers and others – that have recently announced large-scale lay-offs. Beyond any general threat to employment from a weaker economy, there’s a wave of automation and artificial intelligence-related job losses in prospect.
The other sour note in the data was that hourly wages growth is slowing. At 3.5 per cent it is the weakest in more than four years, which helps explain why lower and middle income households in the US are concerned about affordability and why the retail sales data that was also released on Tuesday showed sales flatlining. Many Americans are worried about both their jobs and rising prices.
Protecting jobs is one half of the Fed’s dual mandate. The other is maintaining price stability.
There’s a consumer price index reading due to be released on Thursday which, if it is in line with the recent trend, could show the US inflation rate edging up above its most recent 3 per cent rate, or a percentage point above the Fed’s target of 2 per cent.
Inflation, like unemployment, has been rising about 10 basis points a month in recent months, trends that, if continued, would produce what might be called “stagflation-lite,” or a weakening economy with rising inflation. That would create a dilemma for the Fed, as to which of its mandates it should prioritise.
The jobs data does justify the Fed’s decision last week to cut the federal funds rate, its policy rate, by 25 basis points, the third such rate cut in its past three meetings.
While the unemployment rate is already 10 basis points above the 4.5 per cent rate that most of the members of its rate-setting body (the Federal Open Market committee) projected only a week ago, the slow rate at which unemployment is rising is unlikely, by itself, to shift the majority view on the committee that one more rate cut in 2026 might be the end of this rate-cutting cycle.
When it meets again next month, it will have the inflation data and the December jobs report to inform it.
Also early next year, the BLS will release a review of this year’s jobs data.
In September, it released a preliminary insight into the big revision downwards that history suggests will recur, showing that there were nearly a million fewer jobs created in the 12 months to March of this year than initially reported, which conforms to Powell’s view that the monthly BLS numbers are overstated.
The unemployment numbers explain why recent polls show voters unhappy with Trump’s management of the economy and his imposition of tariffs in particular.
The wealthy, exposed to a buoyant sharemarket, benefiting from Trump’s deregulatory and pro-capitalist agenda and anticipating the massive tax cuts and concessions for companies and the wealthy in the One Big Beautiful Bill Act, are doing just fine.
While the tariffs have had a more modest impact on inflation than most economists had predicted, that could be explained by the lengthy delays between their announcement and introduction, the rate at which companies ramped up their imports ahead of the tariffs and the extent to which companies absorbed some of the increased costs while waiting for certainty, including the outcome of the looming Supreme Court decision on their legality.
If the tariffs remain, their full effect should be seen within the first half of next year.
The mood of American households, as expressed in the polls, contrasts with the continuing ebullience in the sharemarket and retail spending that has been holding up better than might be expected.
Economists are referring to a “K-shaped” economy.
The wealthy, exposed to a buoyant sharemarket, benefiting from Trump’s deregulatory and pro-capitalist agenda and anticipating the massive tax cuts and concessions for companies and the wealthy in the One Big Beautiful Bill Act, are doing just fine.
Lower-income households, who spend more of their income on the basic goods hit hardest by the tariffs and who are being hurt by the weakening labour market and lower growth rate in their incomes, are at the pointy end of the big trends of rising unemployment and inflation within the economy, with the divide between the two Americas – the haves and have-nots – seemingly widening with each data release.
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Stephen Bartholomeusz is one of Australia’s most respected business journalists. He was most recently co-founder and associate editor of the Business Spectator website and an associate editor and senior columnist at The Australian.Connect via email.
