By Megan Leonhardt
Trying to determine the state of the labor market without the official jobs report in recent months has been like reading tea leaves. Alternative data sources sent conflicting signals that job growth was both resilient and struggling.
The latest jobs report is still delayed, but alternative data sources have started to point in the same direction. The latest batch of November labor data now indicate weakening employment opportunities, though job losses aren't severe enough to trigger out-of-control unemployment. Still, the risks to the labor market probably remain strong enough to compel the Federal Reserve to lower interest rates again at the upcoming Dec. 9-10 policy meeting.
One bright spot: Employers are still hanging on to talent. The number of Americans filing for initial unemployment benefits fell to 191,000 for the week ending on Nov. 29, the lowest level since September 2022.
Initial jobless claims are prone to big swings at this time of year, writes Nancy Vanden Houten, lead economist at Oxford Economics. "Still, initial claims have remained in a range consistent with a relatively low pace of job losses despite recent layoff announcements."
There are relatively few of those layoff notices. U.S.-based employers announced just 71,321 job cuts in November, down 53% from the number of layoff announcements in October, according to Challenger, Gray & Christmas.
That probably points to fairly stable unemployment trends. The Chicago Fed's real-time unemployment rate forecast for November is 4.4% on a rounded basis, which is the same rate the Bureau of Labor Statistics reported for September.
Even though the unemployment rate hasn't risen, overall weak labor conditions make a strong case that the Fed will cut interest rates by a quarter-point next week. The odds of a rate cut were at roughly 87% after the release of claims data, according to the CME FedWatch.
Private payrolls, for instance, shed 32,000 jobs last month, according to the ADP National Employment Report released on Wednesday morning. The November job losses upended economists' expectations for a modest gain and were a significant reversal from October, which saw employers gain a revised 47,000 jobs.
The Revelio Labs Public Labor Statistics, which aims to estimate total nonfarm payroll changes and has been less volatile than ADP's series of late, found that the U.S. lost 9,000 jobs in November. That echoes October's 9,000 decline.
Much of those losses were concentrated among small businesses, ADP reported. Companies with fewer than 50 employees shed more than 120,000 jobs in November. Medium and large employers, however, experienced a net increase in hiring.
"We should be quite concerned," says Olu Sonola, head of U.S. economic research at Fitch Ratings. Small businesses employ about 46% of Americans in the private sector. Yet, while small businesses' weakness will continue to create a drag, particularly on hiring conditions, Sonola says it won't drive the macroeconomy into the ditch so long as larger employers remain more stable.
Still, that's a risk that the Fed won't want to gamble on. Chair Jerome Powell will say it was a close call, but markets are correct in expecting a cut.
Write to Megan Leonhardt at megan.leonhardt@barrons.com
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(END) Dow Jones Newswires
December 05, 2025 21:30 ET (02:30 GMT)
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