Noisy Jobs Report Tilts Markets Risk-Off, Fed Odds Steady
After weeks of data gaps from the fall federal shutdown, traders finally got a noisy read on labor conditions. Markets focused on two cross-currents. Payrolls swung from a drop to a rebound, while unemployment rose to a new cycle high. The result was a risk-off tilt that stopped short of panic.
According to Tuesday’s close, the S&P 500 slipped 0.24% to 6,800.26 and the Dow fell 302 points to 48,114.26, while the Nasdaq edged up 0.23% to 23,111.46. Energy was a standout laggard as crude extended its slide and dragged major producers lower, including Exxon and Chevron, which were down about 2% each.
The immediate catalyst was the delayed jobs report. It showed +64,000 payrolls in November after -105,000 in October, with the jobless rate rising to 4.6%. Investors treated the print as directionally weaker but statistically messy. Fed pricing barely budged. CME FedWatch odds held around 24% for a January cut, signaling the market wants confirmation before repricing the path.
What happens next likely hinges on whether “soft growth” morphs into an earnings downgrade cycle. For now, rotation is doing the work. The tape is rewarding defensives and rate-sensitive quality while punishing crowded themes and cyclicals tied to global demand.
Position around clarity, not the noise. With labor data distorted, the next clean inflation and jobs prints will matter more than today’s headline swing.
Shutdown-Blurring Jobs Data Shows Cooling Labor, Softening Spending
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.
S&P Global PMI Cools as Input Prices Hit Three-Year High
Corporate America is still expanding, but the pace is fading as 2025 closes. That matters because the Fed has been trying to cut rates without reigniting inflation, and recent policy volatility has already made planning harder for businesses. The latest “flash” survey suggests growth is losing momentum just as cost pressures build again.
S&P Global’s preliminary December composite PMI slipped to 53.0 from 54.2 in November, a six-month low. Services eased to 52.9 from 54.1, and manufacturing fell to 51.8 from 52.2. New orders softened across both sectors. The survey flagged the smallest rise in incoming new business in 20 months, and goods orders declined for the first time in a year.
The “how” is a familiar mix of demand uncertainty and policy whiplash. Reuters notes the year was shaped by tariffs and immigration crackdowns, plus the data disruptions from the shutdown. Firms reported hiring constraints from costs and weaker demand, even as some still cited labor shortages. That’s a sharp turn from the earlier narrative that the economy could glide into 2026 on a steady services engine.
The inflation angle is the kicker. Bloomberg reported the prices-paid gauge rose to 64.1, a more-than-three-year high, signaling renewed input-cost heat. For the Fed, that creates an awkward trade. Softer activity argues for easier policy. Hotter costs argue for patience. With jobs and CPI data recently distorted by the shutdown, survey evidence can sway sentiment even if it cannot settle the debate.
Watch for second-order effects. If weakening new orders persists into January, you should expect more cautious corporate guidance, slower hiring plans, and tighter discretionary spending from households.
Prepare for a “higher-for-longer, unless growth cracks” policy narrative. The next clean batch of inflation and labor data will decide whether this PMI wobble is a mid-cycle pause or the start of a broader downshift.
CPI, Jobs Data, and Oil Slide Set Key Near-Term Signals
- Track Thursday’s November CPI release for confirmation whether services inflation is reaccelerating.
- Watch the next “clean” employment update. The Fed is likely to lean more on December jobs data after shutdown distortions.
- Monitor crude after the drop to around $55 a barrel. More downside pressures energy earnings and credit.
- Follow Fed messaging from upcoming speakers. Markets are still pricing roughly 24% odds of a January cut, and that can move quickly.
- Keep an eye on input-cost signals. The PMI prices-paid gauge at 64.1 raises the risk of sticky inflation despite slower growth.
