[ad_1]
Want more stock market and economic analysis from Phil Rosen directly in your inbox? Subscribe to Opening Bell Daily’s newsletter.
One week ago, the Federal Reserve forecasted that the unemployment rate would peak at 4.5 percent this year.
That informed policymakers’ decision to lower interest rates by 25 basis points for the third time in 2025.
Yet data from the Bureau of Labor Statistics out Tuesday showed the unemployment rate actually rose to 4.6 percent in November, the highest in four years and a sizable jump from the 4.4 percent seen in September.
So much for the Fed’s estimate for the top.
The report also showed that the US also:
- Added 64,000 jobs in November
- Lost 105,000 jobs in October
If we take those numbers at face value — with the caveat that they will be revised in the coming months — the economy has lost jobs in three of the last six months.
This underscores the central bank’s fundamental limitation of being a backward-looking institution.
As sophisticated as its economic models and calculations may be, they are built on historical data.
And while it feels silly to spell it out in plain language, lagging economic data that’s expected to be revised does not make the best crystal ball for policy decisions. The fact the Fed’s latest estimate turned bad after one week is a fitting reminder of this.
To be fair, this particular jobs report had more shortcomings than usual, distorted by the government shutdown and data delays.
That said, the broader trend of the slowing labor market remains hard to ignore. Job growth has essentially been stagnant since the spring and sentiment surveys tied to finding and keeping a job have deteriorated.
“The US economy is in a hiring recession,” Heather Long, chief economist at Navy Federal, wrote in a post on X. “Almost no jobs have been added since April,” she said, adding that 710,000 more people are unemployed now versus November 2024.
Concerning, too, is that the number of people forced into part-time work for economic reasons rose by nearly a million in just two months.
As smooth a path that the Fed’s PhDs and model-driven forecasts predicted, the economic data has communicated a different reality.
Policymakers will, understandably, downplay this single report and point to cleaner and more reliable data ahead.
Still, the credibility hit that comes with a forecast turning obsolete within seven days is difficult to shrug off — especially for job-seekers and hiring managers navigating the real economy.
The extended deadline for the 2026 Inc. Regionals Awards is Friday, December 19, at 11:59 p.m. PT. Apply now.
[ad_2]
Phil Rosen
Source link