The headline:
The economy added 119,000 jobs in September and the unemployment rate ticked up a tenth of a percentage point to 4.4%, the Bureau of Labor Statistics said Thursday in a report that was delayed by the 43-day government shutdown.
Forecasters had expected roughly 55,000 new jobs and for the unemployment rate to hold at 4.3%.
The interpretation
Dan North, a senior economist with Allianz Trade Americas, told the Washington Examiner that while the headline jobs number for September was better than expected, downward revisions for previous months are of concern.
The weakness in previous months, he said, “tells me that I think there’s more weakness in the labor market than the headline actually shows here.”
“That negative revision almost, to me, is more important than the strong headline,” North added.
What it means…for Trump
Friday’s report shows that the labor market was slowing heading into the government shutdown. Job growth was weaker over the summer than originally thought – as shown by the downward revisions to payroll jobs in July and August of 33,000.
President Donald Trump fired the commissioner of the agency following the report for July, which had shown unusually large downward revisions to previous months’ job gains.
The number for September, though, was more encouraging.
Still, the bigger question is what happened in October and the start of November, during which time Trump’s economic approval ratings fell. It is likely that the October report will show job losses, in part because of the Trump administration’s deferred resignation program for federal employees.
And a major question still hanging over the jobs market is the role played by Trump’s immigration policies, which have massively slowed net migration into the country and may even have turned it negative.
Lower immigration rates likely slow the growth of the workforce, although they might not necessarily entail rising unemployment, since a decline in immigrant labor would also shrink the denominator of the unemployment rate.
What it means for…the Fed
Friday morning’s report led investors to slightly increase the odds that Federal Reserve officials will cut their interest rate target at their next meeting, scheduled for Dec. 9-10. Bond market prices indicate about a 40% change of a quarter-percentage-point rate cut.
Trump pressed for months for Chairman Jerome Powell to lower rates to boost borrowing and spending.
The underlying reality
Friday’s report showed that employment growth has slowed to a point that might raise fears about unemployment.
It is helpful to look at the overall trend for the labor market. With revisions to the numbers for July and August, the three-month moving average of job gains was 62,000 in September. That is below the rate needed to keep up with population growth.
Roughly 112,000 new payroll jobs are needed each month to keep unemployment from rising – the “breakeven rate” of job growth – according to one estimate from the Federal Reserve Bank of Atlanta.
But that figure is highly uncertain, thanks to the Trump administration’s crackdown on illegal immigration. The breakeven rate might be closer to zero if net migration has stalled, and it might even be negative if more people are leaving the country than entering.
Prime-age employment, relative to the overall population, is strong by historical standards, and held steady in September.
Recession watch
The unemployment rate, taken from the jobs report’s household survey, is still low by historical standards. It rose a tenth of a percentage point to 4.4% in September.
Recessions entail a rising unemployment rate.
Friday’s data suggests that the U.S. labor market is still not triggering one major recession indicator — namely, when the three-month moving average of the unemployment rate rises half a percentage point relative to its minimum point over the past year. This indicator, known as the Sahm Rule, signaled the start of all post-war recessions.
The indicator had been triggered in mid-2024, but is no longer signaling a recession.
Federal government employment
Federal government employment fell by 3,000 in September, and is now down about 97,000 since Trump came into office. The number of federal employees is a key statistic to watch to see the effects of the budget-cutting efforts of the Trump administration and the Department of Government Efficiency.
Manufacturing employment
Employment in manufacturing declined by 6,000 in September, adding to a downward trend.
The manufacturing sector is of particular interest because Trump has said that his tariffs will bring manufacturing to the U.S. from other countries. He’s imposed tariffs on China and trading partners around the world, and on steel, aluminum, autos, auto parts, and a number of other goods and services.
Leisure and hospitality
The leisure and hospitality sector has, over the past year, exceeded the employment levels it reached in February 2020, right before restaurants and bars were forced to shut down across the country. It’s continued to grow steadily.
Construction
Construction employment appears to be stabilizing after the housing market took a massive hit over the past few years as mortgage rates have soared alongside the Fed’s rate hikes. The sector is also under pressure from Trump’s tariffs and his immigration overhauls.
Economists will watch closely for any further signs of slowing hiring in construction.
Unemployment rates by race/ethnicity
The household survey also includes unemployment rates by race and ethnicity. Rates for all groups neared record lows in the past few years, but have risen in the past few months.
In particular, the unemployment rate for black workers has been at 7.5% for the past two months, the highest such rate since the pandemic.
