U.S. job growth picked up in September, but the unemployment rate rose to 4.4%, the highest level in four years. Meanwhile, the economy lost jobs in August for the second time this year, highlighting the uncertain environment employers are navigating.
The increase in the jobless rate, reported by the Labor Department on Thursday, was up from 4.3% in August. The rise largely reflected more people entering the labor force to look for work. Separate Labor Department data showed layoffs remained low in mid-November, indicating that the labor market is holding steady rather than deteriorating sharply.
Joseph Brusuelas, chief economist at RSM US, said the latest numbers suggest the labor market is not weakening rapidly. He noted that the data supports a modest growth outlook and adds to the argument that a December rate cut by the Federal Reserve is neither “prudent nor necessary.”
Nonfarm payrolls rose by 119,000 in September after a revised decline of 4,000 in August. Economists surveyed by Reuters had expected an increase of 50,000 jobs. The report had been delayed by the 43-day government shutdown, which also forced the cancellation of October’s employment report. October’s payroll numbers will be released together with November’s data on December 16.
Healthcare remained the strongest source of job creation, adding 43,000 positions, mainly in ambulatory services and hospitals. Restaurants and bars added 37,000 jobs, while social assistance gained 14,000. Transportation and warehousing lost 25,000 jobs.
Federal government employment decreased by another 3,000 positions in September, bringing total losses since January to 97,000. This figure is expected to jump due to buyouts that removed tens of thousands of workers from federal payrolls at the end of the month.
Immigration crackdown limits labor supply
The labor market has slowed notably this year, in part because of significant downward revisions to payroll estimates. Economists and policymakers point to reduced supply and demand for workers. The slowdown has been intensified by a drop in immigration that began late in former President Joe Biden’s term and accelerated under President Donald Trump’s administration.
Economists now estimate the economy needs only 30,000 to 50,000 new jobs per month to keep pace with population growth, compared with around 150,000 in 2024. In September, about 470,000 people entered the labor force, but household employment grew by only 251,000.
U.S. stocks opened higher following the report. The dollar was steady, and Treasury yields moved lower.
Some economists believe the September jobs data could still influence the Federal Reserve’s December 9–10 meeting. Fed officials will not have the November report available by then because its release was pushed to December 16. Minutes from the Fed’s late-October meeting showed that many policymakers remain cautious about cutting interest rates further due to inflation concerns.
The rise of artificial intelligence is also reducing demand for workers, especially in entry-level roles, leaving many recent graduates struggling to find jobs. Some economists argue that AI is contributing to jobless economic growth.
Others point to uncertainty created by the Trump administration’s trade policies, which they say have made small businesses more hesitant to hire. Earlier this month, the U.S. Supreme Court heard arguments on the legality of Trump’s tariffs, with several justices questioning whether the 1977 emergency-powers law gives the president such expansive authority.
