Again, the U.S. labor market was a tale of two economies in September. Nonfarm payroll employment blasted up by 119,000, crushing the consensus of a 51,000 rise. This report was 48 days late from when it was originally expected to be released, calling into question the consistency in data. Although the pick-up in new jobs is certainly encouraging, enlistment metrics point to a continued softening in labor market conditions.
The unusual lag in releasing the September jobs report has led to speculation. Now, though, I think folks are diving into that private sector data that’s been collected over the last seven weeks. Under the surface, this data shows that despite continued job growth in some high-demand sectors, the overall picture of labor market conditions is worsening. The aggregates of net revisions to employment figures for the last two months paint a rosier picture. That was on top of them already having announced a downward adjustment of 33,000 jobs.
Government Employment Figures
Total government payrolls bounced back in September, adding back 22,000, but it’s a hopeful sign in a mixed bag of employment trends. In positive news, state and local government payrolls added more than 36,000 jobs, but federal payrolls fell again, losing 3,000 jobs. This divergence points to unequal realities on different tiers of government employment and presents alarming implications for the stability of the federal workforce.
Private sector employment continued to grow, but the overall unemployment rate nevertheless rose to 4.44%. This increase is the largest amount we’ve experienced since October 2021. This significant jump underscores the mounting pressures businesses are facing in the labor market and the larger economic picture. Unemployment has increased, despite an increase in the labor force participation rate. This reflects a picture of more people actively seeking work, which is promising in the face of continued adversity.
A Closer Look at Payroll Growth
Though September nonfarm payroll growth at 336,000 jobs seems strong overall, if we go a bit deeper things tell a more complicated story. Payroll growth’s three-month average pace moved up to 62,000, a significant jump from recent months. That still represents quite a pullback from the 83,000 monthly pace we experienced in the first half of this year. It’s even a huge decline from the 168,000 average that was just pootled along to in 2024.
The diffusion index for industries adding jobs – a much less available but overall more bullish measure – paints a very different picture. For the first time in five months, this index shot up above 50. Fourth, the timing of this change indicates that many other industries have recently begun to grow their workforces again. Nevertheless, these signs of potential recovery must be tempered with caution as broader economic trends continue to influence employment dynamics.
Looking Ahead
As analysts assess the implications of the September employment report, they remain divided on the outlook for the labor market. The strong job growth figures juxtaposed with rising unemployment and negative revisions from prior months create a complex landscape for policymakers and economists alike.
The mixed signals may complicate decisions regarding monetary policy and economic interventions as businesses and government institutions navigate uncertain conditions. Observers will be closely monitoring forthcoming data releases to gain clearer insights into whether this uptick in job growth can sustain momentum or if softening trends will prevail.