Major economic data points are now trickling in and one of the most important relates to the jobs market.

The recent employment report showed modest job growth in November of 64,000 jobs, which is significantly lower than the pre-pandemic historical monthly payroll increase of 190,000 jobs. October’s data was stark showing a substantial payrolls decline of 105,000 jobs.

The lackluster job growth was partially driven by federal employment changes, but calculations by Wells Fargo show that if we exclude the federal distortions, job growth over the last two months was only 57,000 jobs. There were also some downward revisions to September’s data, bringing the three-month average job growth to roughly 22,000 per month.

The unemployment rate climbed to 4.6% in November, its highest level since the end of the pandemic. While there was noise in the data, this higher unemployment rate aligns with other indicators, such as continuing unemployment claims, the low quits rate and the moderate but increasing layoff rate.

Consumer surveys reflect that the average U.S. worker is aware of the softening labor market and is not as confident about finding a new job should they want or need to. Young entry-level workers ages 20-24 are particularly challenged, with an 8.3% unemployment rate.

Another important dimension is the softening of wage growth. Year-over-year average hourly earnings growth slowed to 3.5%, the weakest pace observed since 2021. I break with mainstream economists on the issue of wage growth as I do not believe the historical approach of examining year-over-year wage growth is applicable now.

Most people hear of a 3.5% increase in average wages, and they juxtapose that to the 3% inflation rate and think workers are coming out ahead. This is incorrect because we have a somewhat unprecedented dynamic in the surging of prices during and after the pandemic leaving us with cumulative, broad-based price increases roughly 20% to 30% higher. This simply was not the case in previous decades. The price increases seen post-pandemic significantly erode single-digit wage increases.

A weaker labor market probably means the Federal Reserve will implement two 0.25% rate cuts in the first half of 2026.

To me, this labor market report highlights my assertion over the past couple of years that we are in a new normal. In past economic cycles, a 4.6% unemployment rate does not sound so bad, but the rate is that low in large part because we have drastically fewer working-age people. As such, the recent data does indeed indicate a softer jobs market.

Tatiana Bailey is executive director of the nonprofit Data-Driven Economic Strategies. Other Gazette articles, TV segments, DDES monthly economic dashboards with technical explanations, and how to sponsor their work can be found at ddestrategies.org.