Mixed Jobs Report Deepens Fed’s Focus on Labor Risks — Evening Brief – 12.16.25 

The Bureau of Labor Statistics released a highly mixed employment report on Tuesday, offering markets both reassurance and renewed concern as policymakers assess where monetary policy goes next. Payroll growth surprised modestly to the upside, but the unemployment rate unexpectedly rose from 4.4% to 4.6%, the highest since September 2021—an uncomfortable signal for a Federal Reserve already shifting its focus toward labor-market risks.   

The U.S. added 64,000 jobs in November, modestly beating expectations for a 45,000 gain, while October was revised to a 105,000 decline, driven entirely by a sharp drop in government employment. 

Revisions once again darkened the recent trend. August payrolls were marked down by 22,000, from a 4,000 loss to a 26,000 loss, and September by 11,000, from a 119,000 gain to 108,000, leaving employment for those two months a combined 33,000 lower than previously reported.  

Government employment fell by another 6,000 in November after a 162,000 plunge in October tied to federal workers exiting under a deferred‑resignation program, leaving federal payrolls down 271,000 from their January peak. Wage pressures also eased at the margin: average hourly earnings rose just 0.1% on the month, or $0.05, to $36.86, and 3.5% year‑on‑year versus 3.6% expected, even as the average workweek inched up to 34.3 hours. 

For the Federal Reserve, the report broadly reinforces the message from the December FOMC meeting, where Chair Jay Powell adopted a more dovish tone and underscored rising risks to employment rather than inflation. Powell flagged what policymakers see as a persistent 60,000‑per‑month overcount in nonfarm payrolls, suggesting headline gains may be overstating underlying momentum. With unemployment creeping higher, wage growth cooling, and labor demand “clearly softened,” the latest data strengthen the case for the Fed to tilt toward additional easing in 2026, or at minimum to maintain a lower‑for‑longer bias unless inflation meaningfully re‑accelerates.