After a promising August, it looks like the job market hit another rough patch.
The US added just 29,000 jobs in September, well below the 90,000 economists expected, and unemployment unexpectedly ticked up to 4.2%.
See all the highlights below from the Bureau of Labor Statistics’ September jobs report.
Here’s what workplace observers are saying about the weak report
The jobs report was unexpectedly soft, with overall job growth of 29,000 driven by the healthcare sector. White-collar sectors were among those that lost jobs over the month. While unemployment inched up, it’s still low and more people joined the labor force. Wage growth has been cooling, and we will see how the latest print compares to inflation mid-October.
Here’s how workplace observers reacted:
– Steve Rick, chief economist at TruStage: “Even with a softer report, this still looks like a labor market that is moderating rather than deteriorating. Employers are not hiring aggressively, but they are not laying off workers aggressively either.”
– Heather Long, chief economist at Navy Federal Credit Union: “The unemployment rate ticked up to 4.2% in September, but for a good reason: nearly half a million more people looked for a job.”
– Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management: “Today’s soft print argues against the idea that the labor market is retightening. One follow-up hike in December remains our base case; however, continued pressure by markets and moves higher in energy prices could force the Fed’s hand this month as well.”
– Jeff Schulze, head investment strategist at Franklin Templeton Institute: “The lack of evidence of a wage-price spiral should allow the Fed to remain flexible and take a more patient approach with the next rate hike.”
Wages grew at a slightly slower rate than in August
Wages increased by 5 cents in September, amounting to a slight 0.1% increase in pay. Overall, hourly wages have risen by 3% year-over-year, a tick down from August’s 3.1% year-over-year gains.
While that means more money in workers’ pockets, recent gains have been dwarfed by rising prices: Through August, inflation had increased faster than wages for five months in a row, leaving many Americans with a price-induced pay cut. The next consumer price index inflation report is set to come out on October 14, which will tell us if that trend has continued.
Data center jobs helped prop the construction industry up
In construction, data center employment was likely the star of the show. The sector added 11,000 roles, but shed nearly 8,000 jobs in residential specialty trade contractors; that includes employees like electricians working on homebuilding.
Instead, gains were heavily concentrated in nonresidential specialty trade contractors — the electricians and other workers in builds like data centers. Nonresidential specialty trade contractors have been a bright spot for the construction industry, which has become more reliant on data center growth.
In construction, data center employment was likely the star of the show. The sector added 11,000 roles, but shed nearly 8,000 jobs in residential specialty trade contractors; that includes employees like electricians working on homebuilding.
Instead, gains were heavily concentrated in nonresidential specialty trade contractors — the electricians and other workers in builds like data centers. Nonresidential specialty trade contractors have been a bright spot for the construction industry, which has become more reliant on data center growth.
“I think it’s fair to say that a very large portion of construction labor demand right now is being driven by increasing data center construction activity,” Zach Fritz, an economist at Associated Builders and Contractors, previously told Business Insider.
Yields drop and stocks rally after weak jobs data cools rate hike odds
Bond yields dropped sharply Friday morning as investors took in the cooler-than-expected jobs data. The yield on the benchmark 10-year US Treasury fell as much as 6 basis points to 5.17%. Major stock indexes popped, with the Dow jumping more than 400 points.
Investors are cheering a soft month for hiring as it suggests the Fed might not rush to raise interest rates as markets previously anticipated, easing the potential headwinds for equities.
Bond yields dropped sharply Friday morning as investors took in the cooler-than-expected jobs data. The yield on the benchmark 10-year US Treasury fell as much as 6 basis points to 5.17%. Major stock indexes popped, with the Dow jumping more than 400 points.
Investors are cheering a soft month for hiring as it suggests the Fed might not rush to raise interest rates as markets previously anticipated, easing the potential headwinds for equities.
Markets are now pricing in a 72% probability the Fed will keep rates unchanged at their next policy meeting, up from a 36% probability priced in a week ago, according to the CME FedWatch tool.
“The jobs report has exposed the Fed’s mistake in real time,” Artem Bakushev, the head of risk at the brokerage Monaxa, wrote in a note. “That is not an economy demanding tighter policy; it is one beginning to lose momentum.”
Labor force participation ticked up
Labor force participation increased from 61.6% to 61.8%, meaning that some of the worrying rise in unemployment could be from people coming off the sidelines and looking for work. Labor force participation is still lower than it was before the COVID-19 pandemic.
The employment-population ratio increased from 59.1% to 59.2%.
Healthcare led the way for job growth
Healthcare continues to be a tentpole for the labor market, but even its blockbuster gains have cooled: In September, the sector added 17,000 roles — a sizable chunk of the payrolls added, but still well below its average gain of 33,000 jobs over the past year. Retail added roles, especially in gas stations, and construction also saw a strong showing, likely spurred in part by data center employment.
The information sector, which encompasses parts of the tech industry, once again shed roles, another bleak sign for workers in publishing and computer infrastructure, including data processing; both fields have been at the forefront of AI-related change. Financial services also took a hit.
Thousands of fewer jobs than previously reported
BLS revised August’s growth of 162,000 to a smaller gain of 133,000. July’s gain of 21,000 was revised back to a loss — with an estimated decline of 10,000 jobs. That adds up to 60,000 fewer jobs than previously reported.
The US added fewer jobs than expected
The economy added 29,000 jobs, far below the 90,000 consensus. Unemployment unexpectedly inched up to 4.2% from 4.1%. Labor force participation rose from 61.6% to 61.8%.
What economists expect
“We expect payrolls to slow from the torrid pace from August, but still to register solid gains. The prevailing narrative for the labor market is one of stability,” Christopher Hodge, chief economist of the US at Natixis CIB, said in commentary.
Job gains and losses at the industry level will also be important to see where there’s strength.
“We expect payrolls to slow from the torrid pace from August, but still to register solid gains. The prevailing narrative for the labor market is one of stability,” Christopher Hodge, chief economist of the US at Natixis CIB, said in commentary.
Job gains and losses at the industry level will also be important to see where there’s strength.
“Seasonality remains an important source of uncertainty,” EY economists Gregory Daco and Lydia Boussour said in commentary. “The larger-than-usual back-to-school rebound in local education employment in August followed an unusually large seasonal plunge in July, and some payback could carry into September.”
They also said the leisure and hospitality sector data has been noisy lately, and the construction sector will likely be under pressure, apart from data center demand.
Data centers need workers
Indeed’s data showed that data center-related postings have skyrocketed since June 2024, while overall US postings are down.
“I think it’s fair to say that a very large portion of construction labor demand right now is being driven by increasing data center construction activity,” said Zach Fritz, an economist at Associated Builders and Contractors.
While these roles seem to be advertised as permanent, it’s uncertain whether that will be the case. Guy Berger, a senior fellow at the research organization Burning Glass Institute, said one worry is if the data center boom cycle ends up being a bust: “And all of a sudden, we trained a lot of electricians, people like that, to do stuff that is no longer needed,” he said.
No recession on the horizon
While consumer sentiment is bleak, as Americans feel the pain of rising prices at the grocery store and gas stations, sluggish hiring, and ongoing uncertainty, there isn’t a recession.
The Bureau of Economic Analysis’s third reading for real gross domestic product this week showed it rose at an annualized rate of 2.2% in the second quarter, slightly cooler than the first quarter’s 2.5%. Unemployment hasn’t changed too much, the economy is still adding jobs, and people are still spending.
Not a lot of openings for job seekers
The BLS reported earlier this week that job openings fell from 7.3 million in July to 7.1 million in August. There was 1 opening per unemployed person in August, down from 2 in 2022.
Construction and manufacturing were among the industries with a decline in openings over the month, while the information sector and retail trade were among those that saw an increase.
Bond yields slip ahead of the jobs report
The market has grappled with a sudden surge in Treasury yields this week, with the 10-year bond yield hitting the highest level since 2002 before paring back. The yield dipped to about 5.21% after spiking to about 5.3% on Thursday.
Stocks have remained relatively resilient in the face of the bond turmoil, and the coming jobs data could reinforce the idea that the economy is strong enough to handle higher rates.
The market has grappled with a sudden surge in Treasury yields this week, with the 10-year bond yield hitting the highest level since 2002 before paring back. The yield dipped to about 5.21% after spiking to about 5.3% on Thursday.
Stocks have remained relatively resilient in the face of the bond turmoil, and the coming jobs data could reinforce the idea that the economy is strong enough to handle higher rates.
“If Friday’s jobs report remains benign, that, coupled with Wednesday’s softer-than-expected PCE report, could keep the Federal Reserve on pause when it comes to any further rate hikes,” Paul Stanley, managing director and founding advisor at wealth manager Arca, said.
The new data could help the Fed decide on its next move
The Federal Open Market Committee will likely use today’s jobs report to inform its October interest rate decision, although more attention has focused on stubborn inflation.
The Fed hiked rates for the first time since 2023 last month; Fed chair Kevin Warsh said in the press conference following the announcement that this “will support a timelier return” to the central bank’s 2% inflation target. Economic projections showed that a majority of Federal Open Market Committee participants expect another hike before 2026 wraps up.
How’s it going for small businesses
Gusto’s small-business report showed that employers added 28,000 jobs last month, with healthcare accounting for almost half of that.
Newly published fourth quarter survey data from financial firm Citizens showed “83% of businesses plan to maintain or increase full-time headcount over the next three months,” and that almost a third of businesses expect to increase their tech spending.
Gusto’s small-business report showed that employers added 28,000 jobs last month, with healthcare accounting for almost half of that.
Newly published fourth quarter survey data from financial firm Citizens showed “83% of businesses plan to maintain or increase full-time headcount over the next three months,” and that almost a third of businesses expect to increase their tech spending.
“Contrary to some headlines, we are not seeing AI fatigue. In fact, we may still be in the early innings of AI helping small businesses play bigger than their size,” said Mark Valentino, Head of Business Banking at Citizens. “A business owner who becomes a super user of this technology can compete like a much bigger company, and that’s showing up in hiring plans.”
The private sector is showing promising signs of job growth
ADP’s report based on private employers showed a gain of 90,000 last month, 2.5 times August’s gain. Establishments with 250 to 499 employees had the highest growth at 36,000.
Education and health services led the growth. Professional and business services, financial activities, and natural resources and mining lost jobs.
Americans aren’t quitting their jobs
The Bureau of Labor Statistics published turnover and openings data earlier this week for August. The quits rate was flat at 1.9%, well below its recent post-pandemic peak of 3%. That’s a sign people don’t feel too confident about their prospects for a new role. Economist Guy Berger wrote that this rate is comparable to estimates seen in 2014 and 2015, when the unemployment rate was much higher.
Market update: Stocks are ticking higher before the jobs report
Futures for all three major US indexes are pushing higher on Friday morning, with the tech-heavy Nasdaq set for a 0.75% gain at the open as of just after 7 a.m. ET. The Dow Jones is pointing to a 0.6% rise, while the S&P 500 is set to climb 0.5%.
“US jobs numbers on Friday may offer some clues into the likely next move from the Federal Reserve on interest rates. This is the earliest release based on hard data to offer a barometer of the health of the world’s largest economy,” Dan Coatsworth, head of markets for investment firm AJ Bell, wrote in a morning email.
Futures for all three major US indexes are pushing higher on Friday morning, with the tech-heavy Nasdaq set for a 0.75% gain at the open as of just after 7 a.m. ET. The Dow Jones is pointing to a 0.6% rise, while the S&P 500 is set to climb 0.5%.
“US jobs numbers on Friday may offer some clues into the likely next move from the Federal Reserve on interest rates. This is the earliest release based on hard data to offer a barometer of the health of the world’s largest economy,” Dan Coatsworth, head of markets for investment firm AJ Bell, wrote in a morning email.
Elsewhere, oil dipped below $100 per barrel on Friday, with Brent crude, the international benchmark, shedding 2.4% to $99.86. US crude is down 4% at $89.17.
The downward moves were driven by reports of emergency releases of crude oil and diesel by European authorities amid record-high consumer prices for fuel.
AI is reshaping what employers value
Jack Kennedy, an economist at Indeed Hiring Lab, said that AI is “reshaping which skills the market pays for” rather than replacing skilled workers.
A recent report examined the advertised pay growth of jobs by their AI exposure. Jobs grouped as more exposed to AI, such as software development and marketing, have seen pay increase by 46% since 2021, while less-exposed jobs have increased by 25%.
A hot jobs report risks reigniting the sell-off in stocks and bonds
The jobs report could be a “good news is bad news” situation for investors. While strong hiring reflects economic strength, it also supports the idea that the US economy is strong enough to withstand higher rates.
In a note to clients this week, strategists on JPMorgan’s market intelligence team said strong jobs data could fuel expectations for “‘demand-pull’ inflation,” or price pressures stemming from stronger wage growth.
The jobs report could be a “good news is bad news” situation for investors. While strong hiring reflects economic strength, it also supports the idea that the US economy is strong enough to withstand higher rates.
In a note to clients this week, strategists on JPMorgan’s market intelligence team said strong jobs data could fuel expectations for “‘demand-pull’ inflation,” or price pressures stemming from stronger wage growth.
“Stable labor market leaves inflation as the Fed’s primary concern,” EY economists wrote in a note to clients this week. “Overall, the September employment report is unlikely to alter our expectation of one additional Fed rate hike this year.”
Markets are pricing in an 88% chance of one or two more rate hikes through year-end.
Wage growth hasn’t kept pace with inflation
Average hourly earnings increased 3.1% over the year in August, while the consumer price index increased 3.4%, marking five straight months that inflation surpassed wage growth.
Laura Ullrich, the director of economic research in North America at the Indeed Hiring Lab, wasn’t too surprised by August’s relatively weak year-over-year rise in earnings.
Average hourly earnings increased 3.1% over the year in August, while the consumer price index increased 3.4%, marking five straight months that inflation surpassed wage growth.
Laura Ullrich, the director of economic research in North America at the Indeed Hiring Lab, wasn’t too surprised by August’s relatively weak year-over-year rise in earnings.
“If employers feel like they don’t have to worry as much about retention, wages aren’t going to grow as much,” she said.
We will get new wage growth data today, but we’ll have to wait until October 14 to see how inflation compares.
Two major industries experienced net job loss
Even if some of the gains were small, all sectors saw positive net job growth except for information and financial activities. The information sector has been on a general downturn since its employment peak in late 2022, and employment was down 4% in August from a year ago. The financial activities sector has also been struggling, with employment down 1.1% over the year.
Leisure and hospitality led job growth, driven by food services and drinking places, after two months of decline.
What we learned about the job market last month
Last month’s report had some good news. The economy added 162,000 jobs in August, and the agency revised up figures from the previous two months, with July’s originally reported net job loss turning into a net gain. Unemployment was flat at 4.1%, while labor force participation ticked up but is still low.
ZipRecruiter economist Nicole Bachaud said while the report was encouraging, one month of data doesn’t make a trend — so it’s worth keeping an eye on to see if the momentum persists.
Last month’s report had some good news. The economy added 162,000 jobs in August, and the agency revised up figures from the previous two months, with July’s originally reported net job loss turning into a net gain. Unemployment was flat at 4.1%, while labor force participation ticked up but is still low.
ZipRecruiter economist Nicole Bachaud said while the report was encouraging, one month of data doesn’t make a trend — so it’s worth keeping an eye on to see if the momentum persists.
“There is still a lot of fragility in this market as workers and employers are both showing increased sensitivity to prices, interest rates, inflation, and geopolitical uncertainty,” she said.