Shenwan Hongyuan Group Co., Ltd. released a research report stating that U.S. nonfarm payrolls declined overall in October-November, with the unemployment rate rising further to 4.6% in November from 4.4% in September. In the short term, the U.S. unemployment rate is "more likely to rise than fall," with demand being the weak spot, but the labor market may gradually "rebalance" by 2026.
Short-term factors such as tariff impacts, government shutdowns, and AI adoption continue to suppress demand. However, by 2026, U.S. labor supply may still contract (due to intensified immigration crackdowns), while demand gradually stabilizes (as tariff shocks and government layoffs ease), keeping breakeven employment levels low.
The report questions whether the likelihood of a Fed rate cut in January has increased, suggesting it remains uncertain and dependent on December economic data. The credibility of the latest unemployment figures is limited, as Fed Chair Powell noted in December that employment data could be "distorted." Additionally, U.S. retail sales in October, released alongside the jobs data, showed resilience, possibly reflecting a strong start to the holiday shopping season.
Key points from Shenwan Hongyuan’s analysis include: 1. **Overview**: The U.S. November unemployment rate unexpectedly rose to 4.6%, nearing the threshold to trigger the "Sahm Rule." Nonfarm payrolls slightly outperformed expectations, but job losses in October-November and wage growth below forecasts (0.1% MoM vs. 0.3% expected) highlighted labor market softness. Post-data market reactions were muted, with equities briefly rallying before correcting. 2. **Structural Factors**: The 4.6% unemployment rate reflects temporary layoffs and improved labor supply. Government furloughs drove October job losses, while private-sector performance was mixed—construction and healthcare rebounded, but white-collar sectors like finance and IT weakened. The report casts doubt on the data’s reliability, citing a low 64% household survey response rate.
3. **Outlook**: The Fed’s January rate-cut odds hinge on December data. Short-term challenges (tariffs, AI, shutdowns) persist, but 2026 may see supply-demand rebalancing. Retail resilience tempurs immediate recession fears.
**Risks**: Escalating geopolitical tensions, sharper-than-expected U.S. slowdown, or a Fed hawkish pivot.
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