Economists, business leaders and politicians have debated the best solution to make America’s cost-of-living feel affordable again, including increasing health care and housing subsidies and reducing tariffs.
But Federal Reserve Chair Jerome Powell says the solution is to pay people more money.
“We are going to need to have some years where real compensation is higher … for people to start feeling good about the affordability issue,” Powell said last week at a press conference after the Fed cut rates.
“We are trying to keep inflation under control, but also support the labor market and strong wages, so that people are earning enough money and feeling economically healthy again.”
The Fed hopes that by reducing interest rates, businesses will spend less to borrow money, freeing up more capital to spend on hiring. A better labor market would give Americans more choices in jobs, increasing the amount of pay companies would need to shell out to keep and attract workers.
If that keeps up, then over time, people will adjust to the higher prices, which will feel relatively affordable as their paychecks grow, Powell argued.
Of course, that’s easier said than done. Americans’ average hourly earnings grew at an annual rate of 3.5% in November, the slowest rate in over four years, according to Tuesday’s jobs report.
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National Economic Council Director Kevin Hassett said Tuesday the Federal Reserve has “plenty of room” to lower rates.
“The reason they can be lower is not just mumbo jumbo,” he said in a CNBC interview. Rather, it’s because there’s an increase in demand for workers as a result of President Donald Trump’s policies, including corporate tax cuts, he said.
Hassett is one of Trump’s top picks to replace Fed Chair Jerome Powell when his term expires in May.
Hassett also said he spent an hour and a half meeting with Trump in the Oval Office on Monday. Trump has repeatedly expressed he wants interest rates to be much lower and would ideally like the next head of the Fed to consult with him before monetary policy meetings.
Hassett said he’d be open to hearing the president out. “If he’s got a good reason … and I found that I agreed with the reason, then I would present it to the others and see what they think,” Hassett said, referring to other members of the Fed’s rate-setting committee. But he said the central bank’s independence is still “really important.”
By all indications, the employment prospects for young workers remained grim in November, as the unemployment rate for 16-to-24 year olds rose to 10.6%, the highest since 2021, with more than 2 million young workers looking for jobs last month.
The unemployment rate for 16-to-19 year olds climbed to 16.3% in November from 13.2% in September, the highest level since August 2020, indicating that high school graduates trying to enter the workforce are facing mounting challenges, as many traditionally blue-collar sectors, like manufacturing and trucking, see job losses.
While the jobs picture for 20-to-24-year-olds improved slightly last month, falling from 9.2% in September to 8.3%, the reading was still the highest figure for the month of November since 2020, and it follows a pattern of increases, and worries about the effects of artificial intelligence on the entry-level job market persist.
In recent months, wage gains for young workers has come down rapidly, with workers between the ages of 16 and 24 seeing a yearly average wage growth of 6.0% in September, lower than at any other time in the past decade, including during the pandemic, according to the Federal Reserve Bank of Atlanta.
The job prospects for young workers and minorities have long been indicators of a weakening economy, a point that Fed Chair Jerome Powell has emphasized as the central bank lowers interest rates in an attempt to support a flagging labor market.
The US economy is failing to add enough jobs to keep up with the supply of new workers.
Job growth over the past three months slowed to an average of just 22,333 through November, according to Bureau of Labor Statistics data.
On a six-month basis, job growth is averaging just 16,666 per month.
This is shy of the breakeven rate of roughly 30,000 to 50,000 jobs that economists estimate is needed to keep the unemployment rate stable.
When job growth slips below the breakeven pace, it means job creation is not keeping up with the growth of the labor force as new workers enter or renter the job market.
This helps explain why the unemployment rate has climbed from 4.4% in September to a four-year high of 4.6% in November.
The breakeven rate of job growth has dropped significantly in recent years as a result of fewer immigrants and aging demographics marked by the retirement of baby boomers.
That means the US economy needs fewer jobs to keep the unemployment rate stable than it did a few years ago. And yet job growth has dropped below even that lowered bar.
Hiring is so weak that the US economy is on track for its worst year of job growth since Covid.
The economy has only added an average of 55,455 jobs per month through November, according to new data released Tuesday by the Bureau of Labor Statistics.
That leaves the job market on pace for its weakest year of job growth since 2020 during the pandemic. Beyond that, this would be the worst job growth since 2009 during the Great Recession.
The economy has outright lost jobs in three out of the past six months: June, August and October. This follows a stretch of four-plus years without any monthly job loss.
The latest jobs report “paints a sobering picture of a job market that may officially be turning frigid after a prolonged cooling period,” Laura Ullrich, director of economic research for the Indeed Hiring Lab, wrote in a note on Tuesday.
Ullrich noted that while the incomplete report may need an “asterisk attached to it” due to the shutdown and federal worker buyouts, the data shows “weak overall” job growth in November concentrated largely in health care.
US stocks opened lower Tuesday as traders digested long-delayed data on the job market that showed the unemployment rate ticked up to 4.6% in November.
The Dow fell 32 points, or 0.07%. The S&P 500 fell 0.18%. The Nasdaq Composite slid 0.24%.
Stock futures had briefly inched higher after the data release before wavering and resuming trading lower.
Wall Street traders are keen for insight into whether the Federal Reserve will cut interest rates in January. However, the Fed is likely to put more weight on the December jobs report, set to be released early next month.
“This is a mixed bag for the Fed,” Thomas Simons, chief US economist at Jefferies, said in a note. “The combined message of all of this data is sufficiently muddled that it does not give a sense of whether broader downside risks to the labor market have intensified.”
“The picture will be somewhat clearer next month,” Simons said.
Traders are pricing in a roughly 24% chance that the Fed cuts rates in January, according to CME FedWatch. That’s unchanged from a 24% chance yesterday.
Elsewhere in markets:
Treasury yields fluctuated and were little changed.
The US dollar slightly weakened against other major currencies.
The VIX, Wall Street’s fear gauge, was relatively flat.
Federal Reserve officials, who are actively trying to preserve the US labor market’s strength, probably weren’t too spooked by the latest batch of employment figures.
The Bureau of Labor Statistics on Tuesday reported that the US economy lost 104,000 jobs in October, recouping only about half of those losses in November. Meanwhile, the unemployment rate last month rose to a four-year high.
While the latest jobs report underscores a slowing labor market, it probably won’t sway what the Fed decides on interest rates at its policy meeting at the end of January.
The Fed earlier this month lowered rates for the third consecutive time, but signaled that further rate cuts in the near term are less likely and will be tougher to justify.
After lowering rates three times this year, policymakers likely want to see how those rate moves affect the US economy, meaning they may hold off on further rate cuts. Central bankers projected just one rate cut in 2026, according to their latest economic projections.
Fed officials will also have more employment data by their January 27-28 meeting
“The report on December’s employment data, released in early January ahead of the next meeting, will likely be a much more meaningful indicator for the Fed when it comes to deciding the near-term policy trajectory,” Haigh said.
The November jobs report showed employers hired 64,000 new workers that month, exceeding economists’ expectations for 40,000 hires.
This came after the economy lost 105,000 workers in October, according to data released Tuesday by the Bureau of Labor Statistics.
“The nation has added a mere 100,000 jobs in the past six months,” said Heather Long, chief economist at Navy Federal Credit Union, in a note Tuesday. “The bulk of those jobs were in health care, an industry that is almost always hiring due to America’s aging population. Almost all other sectors are flatlining or laying workers off right now.”
Here’s a closer look, sector by sector:
While Americans’ earnings are still outpacing inflation, they’re growing at the slowest rate in over four years, according to new data released Tuesday in the delayed November jobs report.
Americans’ average hourly earnings grew at an annual rate of 3.5% in November, whereas inflation grew at a 3% rate in September. The wedge between the two has significantly narrowed as inflation has been reaccelerating and the labor market has tightened, prompting employers to dole out less generous raises and starting salaries.
The last time average annual wage growth was this slow was May 2021, when that rate clocked in at 2.3%.
Tuesday’s jobs data “is nothing but bad, bad news for the economy and the outlook in 2026,” said Chris Rupkey, chief economist at FwdBonds.
The November increase in the unemployment rate shows there are “no jobs out there for American workers that have been laid off,” he said in a note Tuesday.
There are now 7.8 million Americans out of work, he wrote, citing President Donald Trump’s clampdown on foreign labor.
“It stands to reason that if you deport workers from the country there will be fewer jobs showing up in the labor statistics and more unemployment, and that is exactly what we are seeing,” Rupkey wrote.
Sales at US retailers were flat in October, in a sign that America’s economic engine is sputtering.
Retail sales were unchanged in October from the prior month, the Commerce Department said Tuesday, down from September’s 0.1% increase. That’s the weakest monthly reading since May, when retail sales declined.
The October figure was roughly in line with the 0.05% gain economists predicted in a poll by data firm FactSet. The figures are adjusted for seasonal swings but not inflation.
Retail sales overall were pulled down by falling sales at car dealerships and gas stations; so, excluding those purchases, retail sales were up 0.5% in October. Sales also declined at home improvement stores, restaurants, bars and personal care shops.
Tuesday’s report was originally due in mid-November, but was delayed for a month because of the government shutdown.
While spending has been on the weaker side, Americans haven’t cut back outright in the face of low consumer sentiment and higher inflation spurred by President Donald Trump’s widespread tariffs. That should keep economic growth afloat for now: Consumer spending accounts for about two-thirds of the US economy.
In October, retail sales were up in the majority of categories tracked by the Commerce Department, rising the most at furniture stores (2.3%), sporting goods retailers (1.9%) and online (1.8%).
Still, the double whammy of a slowing labor market and higher tariff inflation poses a risk to consumer spending.
Unemployment rose to a four-year high of 4.6% in November and the economy added just 64,000 jobs, new Bureau of Labor Statistics data showed Tuesday.
Tuesday’s jobs report also included partial data for October, after the government shutdown complicated data collection issues for that month.
BLS data shows an estimated 105,000 jobs were lost in October, partly due to deferred resignations from the Department of Government Efficiency that were put in place earlier this year but were effective September 30.
And, for the first time in nearly 80 years, no unemployment rate was released for October due to a lack of data collection during the shutdown.
Economists were looking for a net gain of 40,000 jobs for November and for the unemployment rate to stay unchanged from its September rate of 4.4%, according to FactSet.
The Federal Reserve has been facing two concurrent problems: The job market is getting worse, while inflation is on the rise.
Through its various tools, the central bank can support the job market or control inflation – but it can’t do both at the same time.
As Fed Chair Jerome Powell noted, “there is no risk-free path for policy as we navigate this tension.”
But at its policy meeting last week, the Fed ultimately determined that concerns about the labor market outweighed fears of inflation.
“First of all, gradual cooling in the labor market has continued,” Powell explained. “Unemployment is now up three-tenths from June through September.”
He also suggested that the labor market is cooling even more than that.
“We think there is an overstatement in these numbers by 60,000 (jobs per month,” Powell said in a Wednesday press conference.
That would turn the April to September gains into losses, at about 20,000 jobs per month – revealing a considerably weaker labor market.
Main Street and Wall Street may be rooting for different outcomes from today’s jobs report.
While a strong report could relieve consumers concerned about rising unemployment, it may also reignite concerns among investors about whether the Fed can continue cutting rates in early 2026.
“We are now firmly back in a good is bad/bad is good regime,” Morgan Stanley’s Michael Wilson wrote in a note to clients. “Moderate labor market weakness is likely to be viewed in a bullish context by equity markets.”
On the other hand, Wilson cautioned that one risk to stocks is a “hot jobs print” that lowers the odds of rate cuts.
Coming into today, the Nasdaq has dropped three days in a row amid continued concerns about the high price tag on tech stocks.
US stocks were to set open slightly lower Tuesday morning as traders awaited a slew of long-delayed economic data.
Dow futures were down 19 points. S&P 500 futures fell 0.07%. Futures tied to the Nasdaq 100 fell 0.13%.
Stocks are coming off a day in the red. Wall Street will be attuned to partial jobs data for October and a full report for November, both set to be released at 8:30 a.m. ET.
“This week is loaded with long-delayed government data releases, including on employment and inflation, which will provide a reality check on the economy’s performance in the final weeks of 2025,” Ed Yardeni, president of Yardeni Research, said in a note.
“Neutral” was the sentiment driving markets, according to CNN’s Fear and Greed Index.
With just two weeks left in 2025, the S&P 500 is up almost 16% this year. The benchmark US stock index is trading roughly 1.24% away from a record high set on December 11.
Tuesday morning’s jobs report is expected to show that just 40,000 jobs were added last month and the unemployment rate held steady at 4.4% – historically low but still higher than in recent years.
“I think the September jobs number was probably a high-water mark for what we’re going to see in the more recent data,” said Tyler Schipper, an associate professor of economics at the University of St. Thomas in St. Paul, Minnesota.
“I think my estimation is somewhere between 0 and 50,000 jobs between the two reports. One of them might end up being negative and one of them might end up being positive,” he told CNN.
“But I don’t expect a change from this stalemate where we’re not creating enough jobs to keep the unemployment rate down,” he added.
Wage growth is also expected to slow, which could further put pressure on future consumer spending.
Economists say the US economy’s backbone remains sturdy — for now.
The Commerce Department on Tuesday releases October figures on retail sales, which comprise a sizable chunk of overall spending. Consumer spending is the lifeblood of America’s economy, accounting for about 70% of economic output.
The October retail sales report was originally due in mid-November, but was delayed because of the government shutdown.
However, private data shows the US consumer has remained resilient in recent months: Bank of America estimates that retail sales — excluding volatile categories — grew 0.5% in October, and 0.6% in November.
Americans haven’t cut back on their spending this year, according to government data, despite historically low consumer sentiment and persistently elevated inflation. Economists say that’s largely thanks to unemployment remaining relatively low.
But if the US labor market continues to slow, coupled with broader affordability challenges, it’s unclear for how much longer the mighty US consumer can continue to power the economy.
“Near-full employment has continued to support broad-based consumer demand,” analysts at Moody’s Ratings said in a December 9 report. “But slowing hiring, cooling wage gains, and mounting affordability pressures are eroding households’ consumption growth.”
“A sharper labor market downturn, rapidly rising consumer anxiety, or both together, could weaken momentum in 2026,” they added.
The monthly snapshot of the labor market is generated by the Bureau of Labor Statistics from two robust surveys: One of businesses and public sector entities (tracking payroll, wages and hours) and the other of households (tracking labor force status with demographic detail).
The latter survey is conducted in partnership with the US Census Bureau, whose workers interview households and collect the raw data from in-person visits, phone calls, emails and online.
However, the major federal statistical agencies effectively went dark during the shutdown that lasted from October 1 to November 12. The vast majority of workers were furloughed, and the agencies themselves suspended the collection, processing and distribution of practically all data.
“In practice, it’s surprisingly hard to ask people what they were doing in the past,” said Daniel Zhao, chief economist at Glassdoor. “Their recall diminishes pretty quickly. And so, instead, it’s reasonable just to start looking at the data moving forward.”
With no workers able to conduct the household interviews during the survey week, the BLS later announced that October labor force data – including the unemployment rate – would not be available and the agency would not release a separate jobs report for that month. Instead, October data collected electronically would be included with the November jobs report.
For November, the collection period for both surveys was extended, and extra processing time was afforded, BLS said. As a result, the November jobs report was pushed back from December 5 to December 16.
