The Fed Should Look at Private-Sector Jobs Growth and Not Get Distracted by the Massive Federal Government Job Cuts
by Wolf Richter • Dec 16, 2025 • 1 Comment
Federal government slashed 172,000 jobs in 3 months, Private Sector gained 225,000, the most since May.
By Wolf Richter for WOLF STREET.
Federal government civilian headcount got slashed by 162,000 in October and by 172,000 over the three months of September, October, and November, according to the delayed nonfarm payroll report for November, with backfilled data for October, released today by the Bureau of Labor Statistics, as part of its “establishments survey.”
These federal government job cuts in October include those people who took the voluntary “deferred resignation” deal in the spring under the Trump administration’s buyout program, but who, as part of the deal, remained on the government payroll through September (discussed here on October 3). These voluntary departures were in addition to other layoffs, firings, and early retirements across agencies.
Since January, the federal government has slashed its civilian employment by 258,000, or by 8.6%. And it did move the needle of overall employment growth.
But job growth in the private sector increased from the low point this summer. In November, private-sector nonfarm payrolls rose by 69,000 jobs from the backfilled figure for October (blue columns).
Over the September through November period, the private sector added 225,000 jobs, which pushed the three-month average job growth in November to 75,000, the highest since May (red line).
Government payrolls don’t include workers at government contractors that have lost their jobs due to cancellation of government contracts. They’re reflected in the private-sector jobs count here, such as in “Professional and business services,” where there have been some declines this year.
It’s not the Fed’s job to worry about employment growth at the federal government. The Fed needs to look at private sector jobs and not get distracted by federal government job cuts and their impact on the unemployment rate. It needs to look at this:
This is still fairly anemic job growth in the private sector, but it’s improving job growth after the low point this summer, and it is far better than total nonfarm payrolls that have gotten pushed into the negative for three months this year, and deeply so in October by the federal government’s job cuts of 162,000.
Total nonfarm payrolls, including government employment, rose by 64,000 in November from the backfilled figure for October.
But October had been hit with the 162,000 federal government job cuts, which pushed October job growth into the negative (-105,000).
The three-month average job gain rose to 22,000 in November from a drop in October.
Civilian employment at the federal government has dropped by 258,000 this year through November, to 2.74 million, the lowest since late 2014. Note the plunge in October:
The share of civilian federal employment dropped to 1.72% of total nonfarm employment, the lowest in the data going back to 1939.
Average hourly earnings inched up by 0.14% in November from the backfilled data for October (+1.6% annualized).
The backfilled October data had jumped by 0.44% from September (+4.25 annualized), the most since August 2024.
The three-month average hourly earnings rose by 3.1% annualized and has zigzagged in this range all year.
Year-over-year, average hourly earnings rose by 3.5% in November.
The Household Survey data in the Jobs Report.During the government shutdown in October, the surveys of households were not conducted, and there is no data for October: no data for total employment, unemployment, the labor force, the unemployment rate, the employment-to-population ratio, participation rates, etc. They’re all blanks for October.
The November surveys were conducted, so there is data for November. But this November data too came with big caveats from the BLS, including, “It is not possible to precisely quantify the effect of the federal government shutdown on household survey estimates for November.”
The metrics below are all based on the Household Survey. So we’ll proceed with care and highlight just a few of them.
The number of unemployed jumped to 7.83 million in November, up by 228,000 in the two months since September (no data for October).
Federal government workers who came off the payrolls during this period as part of the government’s headcount reduction and then counted as unemployed powered this 228,000 two-month jump in unemployment.
The unemployment rate, powered in part by the newly unemployed former federal government workers, rose to 4.56% in November from 4.44% in September. While this rate is still historically low, it’s quite a bit higher than it had been in recent years.
The unemployment rate reflects the number of unemployed people who are actively looking for a job divided by the labor force (people working or looking for a job).
The prime-age labor force participation rate (25-to-54-year-olds) ticked up to 83.8% in November, from 83.7% in September (no data for October), which is historically high.
The prime-age labor force participation rate eliminates the issue of the retiring boomers. The labor force participation rate shows the percentage of the population that either has a job or is looking for a job. When people retire and stop looking for a job, they exit the labor force but remain in the population until they die. The surge of boomer retirements, which started about 15 years ago, has pushed down the overall labor force participation rate, as these retired boomers – those that are still around – are still in the population but no longer in the labor force.
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