The United States job market experienced a sharp slowdown in September, adding just 29,000 nonfarm payroll positions while the unemployment rate edged up to 4.2 percent, according to data released Friday by the Bureau of Labor Statistics. The final official employment summary before the upcoming midterm elections revealed that hiring throughout recent months was softer than previously estimated, while wage expansion continued to lose momentum against accelerating inflation. The latest jobs report – and the final official employment snapshot before the midterm elections – also showed that recent months’ hiring was weaker than previously thought and that wage growth slowed, putting Americans’ paychecks further behind the 8-ball at a time when inflation has accelerated.
September’s figures fell well short of market expectations, as forecasters had anticipated the addition of roughly 90,000 jobs and a steady unemployment rate of 4.1 percent. The uptick in unemployment was partially driven by an increase in labor force participation, as more job seekers entered or returned to the workforce. Through September, monthly payroll gains have averaged 68,000. Although this pace exceeds last year’s monthly average of fewer than 10,000 jobs, it remains well below historical pre-pandemic levels.
The latest report included notable revisions to previous months. August’s job gains were revised downward from initial estimates to 133,000, after economists noted seasonal adjustments had temporarily inflated those figures. Furthermore, July’s reading was revised into negative territory, shifting from a previously reported gain of 21,000 positions to a net loss of 10,000 jobs.
Economists describe the current environment as a “low-hire, low-fire” employment landscape influenced by broader demographic and technological shifts, including an aging population, accelerating Baby Boomer retirements, decreased immigration, and the rapid deployment of artificial intelligence. Kory Kantenga, chief economist at LinkedIn, noted that while hiring velocity remains muted, fundamental indicators remain stable. “We are just seeing the labor market holding up,” Kantenga said. “It’s a slow labor market, hiring’s still slow, we still see elevated competitiveness, job seekers still have low confidence; but we don’t see any red flags that the labor market is getting worse.” From an aging population and the rapid adoption of AI to higher oil prices, policy uncertainty and the war with Iran, the job market has mostly been holding up despite a growing list of threats to hiring.
Sector performance was mixed across the economy, with overall job losses outnumbering gains across individual industries. Healthcare and social assistance added 23,000 jobs in September, supported by demographic demand, though this marked a deceleration from the sector’s average monthly increase of 57,000 positions last year. Construction employment expanded for the seventh consecutive month, adding 11,000 jobs primarily in non-residential projects linked to artificial intelligence infrastructure and data center construction. Manufacturing payrolls also expanded by 9,000 positions, extending a four-month growth trend. A likely reflection of the massive investment in AI-related infrastructure such as data centers, the bulk of the gains came from the non-residential side.
Conversely, broad contractions were recorded across white-collar sectors and public employment. State and local government entities shed positions, while financial activities, information technology, and professional and business services recorded net declines. A notable reduction occurred in temporary help services, which cut 10,900 jobs. ZipRecruiter economist Nicole Bachaud stated that the temporary help drop “may signal weakening demand for hiring in the coming months,” noting that businesses frequently adjust contingent staffing levels before altering permanent headcount in response to changing economic conditions.
Earnings growth slowed for the fourth consecutive month, falling to an annual rate of 3 percent in September—its lowest level since May 2021. Navy Federal Credit Union chief economist Heather Long highlighted that diminished wage increases are failing to keep pace with living costs. “Americans are frustrated by the lack of opportunities right now,” Long stated. “Wage growth fell to a new 5-year low and is being wiped out entirely by inflation. That stings heading into the holidays.” Stocks rose and bond yields fell as traders pared back bets for a rate hike from the Federal Reserve at its meeting later this month.
Following the report, stock markets advanced and Treasury yields declined as investors adjusted expectations regarding Federal Reserve interest rate policy. The benchmark 10-year Treasury yield dropped to 5.21 percent while remaining near multi-year highs. eToro US investment analyst Bret Kenwell cautioned against viewing weak economic indicators as inherently positive for financial assets. “Today’s report may revive the ‘bad news is good news’ narrative, but hoping for a weaker labor market just to secure easier financial conditions is a poor tradeoff,” Kenwell wrote, adding that a prolonged slump in employment and personal income would eventually depress consumer spending and broader GDP growth.
Supply constraints and broader macroeconomic pressures continue to cloud the outlook. RBC Capital Markets head of US economics Mike Reid pointed out that ongoing trade tariffs, elevated freight rates, and rising energy expenses present persistent inflationary risks. “It’s a combination of tariffs still being in play and energy costs starting to spill over,” Reid observed. “The real challenge for the US economy is the inflation pipeline is heating up.”
