Dive Brief:

• The unemployment rate rose last month to 4.6%, the highest level in four years, as government layoffs announced in the spring took force, the Bureau of Labor Statistics said Tuesday.
• Federal government payrolls plunged 162,000 in October and 6,000 in November, the BLS said. Meanwhile, employment rose last month in both construction (28,000) and health care (46,000), BLS said, reporting results from both months because the government shutdown halted data collection in October. The jobless rate in September was 4.4%.
• “The low-fire, low-hire jobs market remains intact as the unemployment rate continues to climb,” RSM U.S. Chief Economist Joe Brusuelas said in a note. “Combined slowing in hiring and wage growth will provide a dour end to what is shaping up to be a lost year of weak growth in the American economy.”

Dive Insight:

The rising jobless rate and mounting signs of labor market weakness bolsters the Federal Reserve decision on Dec. 10 to trim the main interest rate by a quarter point to a range between 3.5% and 3.75%.

“The payroll data most likely reaffirmed the call of those at the Federal Reserve who voted to reduce the policy rate,” Brusuelas said.

Fed Governor Stephen Miran dissented from the decision, calling for a half-point cut and noting the cooling job market, while two policymakers dissented in favor of no change, citing how inflation persists above their 2% target.

Central bank officials in a median projection forecast just one quarter-point reduction in the federal funds rate in 2026. They expect that their preferred measure of inflation — the personal consumption expenditures price index less volatile food and energy prices — will end 2026 at 2.5%.

Yet the fresh labor market data did not alter bets by futures traders on the future path of interest rates.

“It is best not to overinterpret this data because there will most likely be subsequent revisions to the initial estimates for both months,” Brusuelas said.

“The one major takeaway is that hiring and wage growth has slowed as the holiday shopping season approaches, suggesting that growth will weaken in the final months of the year,” he said.

Growth in average hourly wages last month slowed to 0.1% and rose 3.5% from last year, BLS said.

Reflecting weak wage gains, retail sales growth slowed in October, registering zero growth after rising 0.1% in September.

U.S. retail sales decelerated this fall, the Census Bureau said Tuesday, adding to evidence that the economy has cooled in recent months.

The report, delayed by the recent government shutdown, showed that sales at retail stores were flat in October after growing 0.1% in September.