Economists highlight that upcoming revisions may reveal weaker outlook
A flurry of important economic data is set to arrive between now and the end of the year, potentially giving some indication on how the US economy is shaping up as the Federal Reserve weighs further interest rate cuts in 2026.
In a recent weekly analysis, RBC Economics projected moderate employment growth for October and November while cautioning that upcoming data revisions could reveal a weaker labor market than current figures suggest.
The analysis forecasts 93,000 jobs were added to the US economy in October, in line with October JOLTS data after accounting for total separations from new hires. For November, RBC expects an additional 89,000 jobs were added.
Economists noted that furloughed federal workers who were not paid during the shutdown will still be counted as employed in the nonfarm payrolls report, preventing distortions from the government sector in October data.
RBC anticipates the unemployment rate will hold steady at 4.4% in November. No unemployment rate will be reported for October due to shutdown disruptions to the household survey.
Job growth patterns
Health care continues to drive structural job creation, while trade-exposed sectors, such as manufacturing, face ongoing declines. Hiring in cyclical services improved in September, particularly in leisure and hospitality, with further gains expected. The ISM Services employment index rose 2.5 percentage points through November after bottoming in July.
The analysis described the current labor market as maintaining a “low-hiring, low-firing backdrop.”
Data revision concerns
Despite RBC’s estimates pointing to a breakeven employment pace of 40,000 monthly, economists do not expect the unemployment rate to fall despite consecutive payroll gains exceeding double that pace. Anticipated downward revisions to payroll data are the primary factor.
Annual QCEW benchmark revisions earlier this year showed monthly payroll gains were on average 70,000 lower than previously published through March 2025. Federal Reserve chair Jerome Powell acknowledged this at the December FOMC meeting: “So, there is an overcount in the payroll job numbers we think, continuing, and it will be corrected.”
If overestimation continues at a similar magnitude, employment growth would likely be at or slightly below breakeven levels, according to the economists. Administrative data from the Social Security Administration indicates retirements are outpacing labor force exits reported in the household survey. Both factors are likely to appear in Q1 2026 data.
Additional indicators
In addition, RBC forecasts core inflation will hold steady at 3.0% in November, with headline inflation likely rising to 3.1% due to upward pressure from energy and food prices.
The November CPI report faces unique challenges because October’s report was canceled due to the government shutdown, limiting assessment of tariff passthrough in trade-exposed sectors. RBC expects core inflation to remain above 3.0% year-over-year for most of 2026.
The analysis also projects headline retail sales fell 0.6% month-over-month in October, weighed down by weaker motor vehicle sales. Initial jobless claims are expected to normalize the week of Dec. 13, with claims rising to 215,000.
