The US economy is entering 2026 with a labor market that looks cooler and a consumer that is still spending, but with less momentum. The complication is measurement. The record-long shutdown disrupted collection, forcing the government to publish a partial October picture and a fuller November report together, with warnings that household-survey effects could linger.
The toplines were stark. The Bureau of Labor Statistics reported +64,000 jobs in November after -105,000 in October, while unemployment rose to 4.6%, the highest since 2021. A broader underemployment gauge climbed to 8.7%, pointing to more part-time-for-economic-reasons and discouraged-worker pressure. Wage growth is easing too. Average hourly earnings were up just 0.1% m/m and 3.5% y/y, the smallest annual gain since May 2021.
Composition matters. The same release noted health care added 46,000 jobs, accounting for more than 70% of net gains, while transportation and warehousing fell 18,000 and leisure and hospitality lost 12,000. October’s decline was heavily influenced by government payrolls. Government employment dropped 162,000 as deferred layoffs took effect, an unusual policy-driven swing that makes “trend” hard to read in a single month.
Meanwhile, the consumer signal softened. The Census Bureau reported October retail sales were flat, the weakest reading in five months, though “control” spending excluding autos and gas was stronger. The combined picture fits a slowdown, not a stop. It also explains why the Fed may hesitate to react quickly after cutting rates three times late in 2025.
Next steps are about verification. Policymakers and markets will likely lean more heavily on December employment and inflation prints, because they should be less contaminated by shutdown-related survey gaps and back-end adjustments.
Use this data as a directional warning light, not a definitive verdict. The key question is whether slowing hiring plus cooler wages reduces inflation without triggering a broader demand shock.
