Jobs Growth Still Weak

December 15, 2025

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We finally got jobs data for October and November (which was delayed by the shutdown).  The main takeaway:  the unemployment rate is creeping higher, and job growth is still weak – but it’s not falling off a cliff.  That tepid growth is lowering hopes for more rate cuts next year.

The S&P 500 is -0.8%.  The tech heavy Nasdaq 100 is -0.5%.  The healthcare sector is down -1.9%.  The energy sector is down -2.9%.

Jobs Growth

As a reminder, there are two measures of employment that we track.  First, the total number of people who have jobs.  Second, the unemployment rate.

First, the total number of jobs.  That is still growing – but slowly.   For the last few months, it’s been below +1% annual growth.   Historically, 1% is the red line.  If you look at the chart below, each time that growth tipped below that, it led to bad recession soon after.

But Fed Chair Powell seems unconcerned by the slow growth.  His view is that demand for jobs is shrinking at the same time as the supply of workers (b/c immigration).  As a result, wages and unemployment remain healthy-ish.  Hmm.  I see your point Jay, but that chart is worrying.

Second, the unemployment rate.  This is grinding higher.  In the chart below, you can see the unemployment rate and its 2yr moving average (bright blue line).  Any time the unemployment rate (dark blue) has jumped above the moving average, it’s usually ended in recession.  Well, that’s where we are now.  The counter-argument is that it’s not “spiking” higher, like we saw in prior moves.  It’s more of a slow grind upwards.  Well… okay.

Even more worrisome is the “under”- employment rate.  This figure combines unemployed people with the people working part-time jobs but who want full-time jobs.  That under-employment level is up sharply – 8.7% now versus 7.7% in Nov’24 and 7.0% in Nov’23.   This could be what we’re seeing in the K-shaped economy, where many retailers and restaurants are reporting weakness in low income customers.

So what’s all this mean.  The job market is slowing - no doubt.  But not falling off a cliff.  So what’s THAT mean?  Well, it’s bad for stocks because it means less chance of rate cuts in the near term.  However, the job market IS slowing.  So longer-term inflation expectations are falling.  (The market implied 5-yr inflation outlook is down to 2.36% today, which is near the bottom of its post-COVID range.)  That will put downward pressure on long-term interest rates.

That means it might finally make sense to buy longer-term bonds.  That’s the first time I’ve said that in a long time.  “Everyone break out your calculators!  Time for some bond math.”  I kid, I kid… for now.