Unemployment Rate Hits 4.6% as Federal Cuts and Tech Layoffs Bite

A four-year high, delivered late

The U.S. unemployment rate rose to 4.6% in November 2025. That was the highest jobless reading since September 2021 and it came in a jobs report that the government shutdown had pushed back by weeks.14 Employers added 64,000 jobs in the month, more than forecasters expected. The same release, however, showed the economy lost 105,000 jobs in October.13 Revisions also took a combined 33,000 jobs off the August and September totals.13

The report was unusual in how it was put together. The 43-day federal shutdown stopped data collection, so the Labor Department released partial October figures alongside the full November report.15 Household survey data, which produces the unemployment rate, was not collected at all for October.17 Officials said they would not publish a complete report for that month, which left the first partial gap in the unemployment series in more than 70 years.18

Outlets across the political and editorial spectrum agreed on the main numbers. They differed more on how worried readers should be, and that disagreement says as much about the labor market as the figures do.

The federal workforce finally hit the payroll data

Most of the October drop came from Washington. Federal payrolls fell by 162,000 in October and by another 6,000 in November.11 These cuts dated back to the spring. Many workers who took the administration's deferred resignation offers stayed on the payroll through the September 30 end of the fiscal year, so their departures showed up in the data all at once.1913 By one count, federal employment had fallen 271,000 from its January peak.18

Announcements of job cuts matched that pattern. Challenger, Gray & Christmas counted about 1.21 million announced job cuts in 2025, up 58% from the year before.27 Actions attributed to the Department of Government Efficiency were the most common reason given, at 293,753 planned layoffs.27 Government-sector cuts were heavily concentrated early in the year: 279,445 in the first quarter, compared with 28,722 over the following nine months.27

One point is worth stressing. The jump to 4.6% was mostly not caused by private companies firing large numbers of workers. Reporting on the household data found that the labor force grew faster than employment, and that the number of people saying they had permanently lost a job actually fell.16 Analysts pointed to people re-entering the workforce as a main driver.14 Economists read that in different ways. Re-entry can mean people feel confident about finding work, or it can mean households need a second income after the main earner lost a job.12

Low-fire, low-hire, and narrow

The phrase economists used most often for this market was "low-fire, low-hire." RSM's Joe Brusuelas said the pattern was holding even as unemployment rose.11 New York Fed President John Williams described the cooling as gradual, with no sign of a sharp rise in layoffs, but he called job growth "anemic."14

The sector breakdown is where the weakness becomes clear. In November, health care added 46,000 jobs and construction added 28,000.15 The Center for Economic and Policy Research calculated that the economy added only 119,000 jobs from April to November. Health care and social assistance accounted for 430,000 of them, which means the rest of the economy lost about 310,000.20 Plante Moran reached a similar conclusion: without health care hiring, job creation was close to zero.19

Several analysts dated the slowdown to the April tariff announcements. The Fiscal Times reported that monthly job growth averaged about 17,000 over eight months.18 Plante Moran put the seven-month average below 20,000.19 Navy Federal's Heather Long said businesses were holding off on hiring while they adjusted to tariffs, uncertainty and AI, and that the U.S. had roughly 700,000 more unemployed people than a year earlier.14

The effects were uneven. Black unemployment rose to 8.3% from 7.5% in September.13 Long-term unemployment, meaning people out of work for more than six months, reached 1.9 million, up from 1.7 million a year earlier.15 CEPR noted that the unemployment rate for college graduates, at 2.9%, was the highest since July 2021, while rates for workers without degrees edged down.20 Lightcast's Ron Hetrick said the number of part-time workers who wanted full-time hours was the highest since March 2021.12

Wage growth loses momentum

Pay growth slowed alongside hiring. Average hourly earnings rose just 0.1% in November and 3.5% from a year earlier.11 Pay was still outpacing inflation at that point, but it was growing at the slowest rate in more than four years.16 Retail sales were flat in October, which suggests the slowdown was starting to reach consumers.13

Looking back from late 2026, the wage trend has turned out to be the more lasting story. Annual growth in average hourly earnings dropped to 3.0% in September 2026, below the inflation rate and the weakest since the depths of the pandemic.2 Indeed's Hiring Lab reported that wages advertised in job postings were up 2.4% from a year earlier, while CPI inflation was 3.7%.6 Long has described wage gains as being "wiped out entirely by inflation."1

Tech layoffs: from over-hiring to AI

Technology companies led the private sector in announced job cuts in 2025, with 154,445, up 15% from 2024.27 Andy Challenger said the cuts reflected both the industry's fast move toward AI and years of over-hiring.27 Companies explicitly cited AI for 54,836 announced cuts in 2025.27 Amazon and Salesforce were among the large employers that named AI as a factor.24 In the fall of 2025, Challenger said AI was making it harder for entry-level engineers in particular to find positions.22

That trend has grown in 2026, even as total layoffs have fallen. Through July 2026, the tech sector had announced 149,023 cuts, up 67% from the same period in 2025 and 31% of all announced cuts.21 AI was the leading reason employers gave for five straight months.21 By early June, AI-attributed cuts for 2026 had already exceeded the full 2025 total.23 Challenger has cautioned that the label is unreliable, because citing AI can appeal to investors while putting off employees.21 Government data shows similar strain: information services lost 10,000 jobs in September 2026 amid concern about AI's effect on employment.1 Indeed's index of software development postings was among the weakest of any sector it tracks.6

The Fed's dilemma, then and now

In December 2025, the data supported the Fed's quarter-point cut on December 10 to a range of 3.5% to 3.75%.11 Fed Chair Jerome Powell said the payroll numbers probably overstated job growth, partly because of the immigration-driven change in population.13 By one account, Fed officials estimated the overstatement at about 60,000 jobs a month.18 Even so, several strategists expected the Fed to treat the shutdown-affected figures cautiously.1415

The situation has since reversed. In 2026, with inflation rising after the start of the war in Iran, the question became whether the Fed should raise rates rather than cut them.2 Weak September 2026 hiring was widely seen as removing the case for an October hike.8

Reading the numbers a year later

The 4.6% figure now looks like a high point. Unemployment stayed between 4.1% and 4.3% from March 2026 onward, and stood at 4.2% in September.34 A New York Times account of the September 2026 report says the rate has stayed at or below 4.5% since October 2021.2 That suggests later revisions to the data changed the November 2025 reading.

Our view: the headline rate overstated how much the economy was deteriorating in late 2025, because federal buyouts and people returning to the labor force inflated it. But the economists who saw a fundamentally weak labor market were right. Initial jobless claims stayed near historic lows, and layoffs never surged.8 What weakened instead was hiring breadth and pay growth. Job seekers face long searches, white-collar and tech workers face cuts attributed to AI, and employed workers are seeing raises fall behind prices. That is not a recession labor market, but it is a market where workers have little bargaining power, and the November 2025 report was an early sign of it.