On Friday, the U.S. will publish the unemployment report for the month of November. Consensus estimates point to a 4.2% rate, just 0.1% more than October, but lower than July (4.3%). With all the new measures the president elect and his team is going to put in place to make the government more efficient, we could see a significant increase in unemployment. After all, the government is the single biggest employee of the country with 2.95 million workers on payroll at Federal level and 19.6 million at state and local government level. That represents 1.8% and 12% of all employees in the country, respectively. We can easily see a 5% unemployment exclusively due to the effect of DOGE, by eliminating 30% of the federal level employees. What would the Fed do in that scenario? Will they cut rates more aggressively to cope with their full employment mandate or will simply stay the course and control inflation? Is is a chess move by the new government to force the Fed into lower rates?
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