The U.S. labour market showed clear signs of cooling in the final months of 2025, according to long-delayed government data released this week. The economy added a modest 64,000 jobs in November, but this followed a significant loss of 105,000 positions in October, largely driven by federal workforce cuts.
Delayed Data Reveals a Cooling Labour Market
The reports from the U.S. Labor Department, covering September, October, and November, were severely delayed due to a 43-day federal government shutdown. The data, finally published on Tuesday, painted a picture of a hiring environment that has lost considerable momentum.
While the November job gains surpassed economist forecasts of 40,000, they were overshadowed by the steep October losses. The unemployment rate climbed to 4.6% in November, marking the highest level since 2021. This rate has been rising steadily since it hit a 54-year low of 3.4% in April 2023.
The October job losses were primarily caused by a drop of 162,000 federal workers. Many departed at the end of the fiscal year on September 30, following pressure from billionaire Elon Musk's widely publicized purge of U.S. government payrolls. Furthermore, revisions subtracted an additional 33,000 jobs from the previously reported totals for August and September.
Uncertainty from AI and Trade Policy Chills Hiring
Economists point to a cocktail of factors behind the hiring slowdown. Businesses are grappling with uncertainty stemming from President Donald Trump's tariff policies and the lingering effects of high interest rates engineered by the Federal Reserve in 2022 and 2023 to combat inflation.
Perhaps more significantly, companies are in a holding pattern as they try to determine how to integrate artificial intelligence and automation into their operations. This technological shift is creating widespread hesitation about when and where to hire human workers.
"We've seen a lot of the businesses that we support are stuck in that stagnant mode: 'Are we going to hire or are we not? What can we automate? What do we need the human touch with?'" said Matt Hobbie, vice president of staffing firm HealthSkil in Allentown, Pennsylvania. He noted cooling in logistics sectors due to increased automation and robotics.
Federal Reserve Divided on Response
The murky economic picture has left Federal Reserve policymakers at odds. Worries about the job market prompted the Fed to cut its benchmark interest rate by a quarter point last week, its third cut this year. However, the move saw the most dissents in six years, with three officials refusing to support it.
Two officials voted to keep rates unchanged, concerned that inflation remains above the central bank's 2% target. In a politically charged dissent, Stephen Miran—appointed by President Trump to the Fed's board in September—voted for a larger rate cut, aligning with the president's public demands.
The delayed and incomplete data, a direct result of the government shutdown, has made the Fed's deliberations even more challenging. For now, American companies appear to be holding on to existing employees but are showing a marked reluctance to create new positions, leaving job seekers in a difficult and uncertain landscape.
