The Jobs Slump the Fed Can’t See
As the Federal Reserve prepares for its final meeting of the year on 9–10 December, investors remain focused on the pace of disinflation, shifting rate-cut expectations and the politics of monetary policy. Yet the data most likely to influence the Fed’s next move is coming not from the CPI release but from the labour market — where conditions are weakening far more sharply than headline numbers suggest. Markets are beginning to recognise what the official data obscures: the US economy is not gently cooling, it is quietly deteriorating.
On the surface, the employment picture still appears resilient. Initial Claims remain close to levels historically associated with stable hiring, while Continued Claims — roughly 1.8 million — have only edged higher. But these readings have become increasingly unreliable guides. US unemployment insurance is designed to drop people from the rolls once benefits expire, often after 16 to 21 weeks. In practice, millions who remain jobless disappear from the statistic long before they return to work.
A more accurate lens is the combined pool of Continued Claims plus those unemployed for 15 weeks or more. This figure now exceeds 5 million, its highest since late 2021. Even a stricter measure, adding Continued Claims to those unemployed for 27+ weeks, approaches 3.7 million. The internal composition is more telling still: more than 40% of America’s 7.6 million officially unemployed have been without work for at least 15 weeks — a share rising quickly. That is not the profile of a labour market slowing at the margins; it is the profile of one struggling to reabsorb displaced workers.
The undercount extends well beyond benefit exhaustion. Self-employed workers, who make up a growing share of the modern workforce, are excluded entirely from unemployment insurance. Many immigrant workers do not claim benefits or respond to BLS surveys. Small businesses — the first to feel the pain of tight credit, weak demand and rising costs — are under-sampled despite being central to job creation. These blind spots mean the most economically fragile workers, firms and sectors are exactly those least represented in official data.
Data revisions reinforce the concern. The Bureau of Labor Statistics has revised Nonfarm Payrolls downward in 26 of the past 32 months, signalling a systematic tendency to overstate job creation initially and correct months later. Private-sector trackers already show slowing or negative job growth in industries the BLS still reports as expanding. Markets may be relying on data that is structurally overstating labour market strength.
This is the backdrop against which the Fed must set policy. Inflation is uncomfortable but not accelerating: goods prices are soft, wage growth is easing, and shelter inflation is mechanically rolling over. Household finances tell a colder story — rising grocery bills, higher insurance premia, and climbing delinquency rates. Adding a weakening labour market to this mix raises the risk of a downturn that monetary policy could mitigate only if it adjusts in time.
The question for investors is not whether the Fed will tighten — it is whether the central bank will ease quickly enough to prevent the labour deterioration from turning into a broader recession. A slow or overly cautious response would leave policy effectively too restrictive for an economy already losing momentum.
The December meeting will reveal whether policymakers recognise the scale of the shift beneath the surface. For markets, the risk is increasingly clear: a Fed that does not move fast enough risks amplifying the uncounted crisis already unfolding in America’s labour market.
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