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Economic Data Release

NOVEMBER NFP HIDES MORE THAN IT TELLS

ADMIN || 17th December 2025

First, we look at the key nos in today’s NFP:

a. Payrolls rose 64,000 in November. While above the median forecast of economists, that came after an outsize 105,000 decline in October that was driven by a 157,000 plunge in government payrolls: the deferred impact of DOGE cuts to the federal workforce.

b. The unemployment rate unexpectedly climbed to 4.6%, the highest level since September 2021.

c. But above was a likely result of LFPR (Labor force participation rate) rising to 62.5% from 62.4%.

Also, if we look at private payrolls, gains have accelerated in recent months to a monthly average of 75,000 since September. By contrast, for the May-through-July period, the average was just 15,000.

We also believe government shutdown itself had an ambiguous impact on the survey. Generally speaking, furloughed government workers who are expected to be recalled are supposed to be classified as “unemployed on temporary layoff,” but we know from previous shutdowns that individuals classify themselves in an inconsistent manner in the government’s survey. And indeed, “temporary layoffs” seem to explain about 10 basis points of a 12-basis-point increase in the unemployment rate.

The BLS also noted a lower survey response trend, and said that the confluence of factors meant that the unemployment rate “required a 0.26 percentage point change to be statistically significant compared with a required change in September of 0.21 percentage point.”

Fed rate cut pricing barely changed after the data. It still remains at 58 bps of cut priced in for CY26.

We do believe that the labor market is cooling but it is not falling off the cliff. The Fed may prefer to see further evidence of economic weakness before its next cut, but based on today’s data, more rate reductions are likely next year than the single cut currently penciled into the Dec dot plot. Our own view is we might see 2 cuts of 25 bps each in the June & Sep FOMC meeting. We continue to see 10yr UST yields gradually drifting upwards to 4.30 levels in short term and DXY headed higher to 102 levels in medium term.

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