Beautifying the Collapse: How the 'Government Shutdown' Hid the Disasters of the US Labor Market

While Washington was engulfed in its political conflicts that led to the paralysis of the "government shutdown," the US labor market was recording its worst performance in years, away from close scrutiny.

Today, delayed figures reveal that we are not just facing a slowdown but a "statistical deception" used to cover up the loss of thousands of jobs and the bleeding of small businesses.

With unemployment reaching 4.6%, Jerome Powell faces two bitter choices: either to hold on to high interest rates that will finish off what remains of growth or to succumb to market pressures with an "emergency cut" in early 2026 to save what can be saved from the wreckage of the eroding "American Dream."

The employment data released this week were not just passing numbers; under the microscope of UBS Bank, they turned into evidence indicting a structural weakness gnawing at the body of the US labor market.

This fundamental decline, revealed by experts, is no longer just a "summer cloud" but is seen as an inevitable starting point that will force the Federal Reserve to cut interest rates early next year.

Analysts believe the Fed, which had bet on the resilience of employment, may find itself forced to make urgent "monetary concessions" to repair the cracks beginning to appear in the world's largest economy.

The report issued yesterday by the US Bureau of Labor Statistics, delayed due to the government shutdown, showed that nonfarm payrolls added only 64,000 jobs in November, a figure that has remained relatively unchanged since April.

Meanwhile, the unemployment rate continued its steady rise in the last part of this year, now stabilizing at 4.6%.

The "Part-Time" Deception

Away from flashy headlines, the data details revealed a "distressed reality" grinding down the ambitions of the workforce as the year ends; 5.5 million people fell into the trap of "involuntary unemployment."

These are not just numbers but victims of an economic system that forced them to accept "half-jobs," with a frightening increase of 909,000 people in just one month.

According to the Bureau of Labor Statistics, these workers did not choose flexible hours but were forced into part-time work due to reduced hours at their companies or because they faced the barrier of not finding full-time jobs that guarantee them a minimum standard of living security, signaling an erosion of the middle class's purchasing power.

In a related context, the unemployment rate among teenagers rose monthly to reach 16.3%, while the number of unemployed for less than five weeks was 2.5 million in November, an increase of 316,000 since September.

This clearly indicates that new entrants to the labor market and those transitioning between jobs face great difficulty in securing sustainable roles.

Consequences of the Government Shutdown and Analysts' Doubts Despite the absence of a full employment report for October, this week's data included the fact that federal government employment fell by 162,000 jobs in October.

Accordingly, Paul Donovan from UBS Bank said in a client memo: "The data raised several red flags," adding that the quality of the data itself should be treated with "extreme caution" because the government shutdown exacerbated the problem of declining response rates to the bureau's surveys.

However, Donovan added: "The report does not alleviate many concerns about the resilience of the American consumer; employment in restaurants continues to grow, indicating that the trend in entertainment spending continues. But perhaps there are sufficient concerns about the health of the labor market to justify an 'insurance' rate cut by the Fed next year."

Investor Ambitions

On the financial markets front, investors' hopes for a near-term rate cut seem to have collided with reality; data from the Federal Reserve Watch Index of the Chicago Mercantile Exchange indicate an almost complete exclusion of any rate cut at the upcoming meeting at the end of January 2026.

Despite economic pressures, the probability of a quarter-point rate cut (25 basis points) did not exceed 22% at the time of writing this report, reflecting a state of cautious anticipation.

Elise Osenbo, Chief Investment Strategist at J.P. Morgan, described the October figures as "particularly shocking" and supported Donovan's view, saying: "This report reinforces how we think about the Fed's current policy approach, and making 'insurance' cuts over the past few months was wise and led to interest rates reaching a more neutral level."

She added: "One more cut in the first quarter of 2026 may be appropriate, but the economy appears stable enough to warrant patience."

Small Business Massacre

On the other side of expectations, Nela Richardson, Chief Economist at ADP for payroll data processing, rejects the wave of government optimism; she confirms she does not see a "rosy picture" in the US private sector data.

According to the latest reports from the institution, the largest global reference for private sector payrolls, private employment shrank by 32,000 jobs in November, driven by a collapse in employment in small businesses.

Richardson explained that micro-businesses with fewer than 19 employees alone cut 46,000 jobs, while medium-sized companies reduced another 74,000 jobs.

She warned that "micro-businesses" represent the backbone of the market, and their collective move to reduce employment means we are facing a "slow death" of sustainable job opportunities, where departures are not replaced, leading to a quietly widening employment gap behind the veil of misleading government numbers.