News & analysis
US Hiring Slowed Sharply in September, but Jobless Rate Barely Moved
Payroll growth came in far below trend and prior months were revised lower, yet a rising labor force and falling U-6 rate kept the unemployment picture stable — leaving the Fed focused on inflation.
Key points
- September payroll growth was weak and the prior two months were revised lower, but the unemployment rate rose only marginally to 4.175% and the U-6 rate fell to 7.6%.
- Average hourly earnings slowed to 0.1% month-on-month, while annualized labor-income growth held at 4.2%, still enough to support consumer spending.
- Deutsche Bank's base case remains two further 25 basis point rate hikes over the next couple of quarters, with the Fed more focused on inflation than on labor-market weakness.
September hiring slowed sharply, with headline employment rising just 29K and private payrolls up 46K, while the prior two months were revised down by a combined 60K, according to Deutsche Bank's read of the data. Even so, the unemployment rate edged only slightly higher to 4.175% and the broader U-6 rate fell to 7.6%, a split that leaves the labor market looking broadly stable rather than deteriorating.
The household survey, which polls people directly rather than employers, told a more encouraging story than the establishment payroll count. Employment rose by 406K and the labor-force participation rate climbed to 61.8%, its highest since May. Prime-age participation and employment rates also continued to recover. That combination — more people entering the workforce and finding work — is why the unemployment rate moved so little even as headline hiring slowed.
Pay growth cooled. Average hourly earnings rose 0.1% month-on-month, a slower pace than the prior trend. But Deutsche Bank notes that labor-income growth remained relatively firm at an annualized 4.2%, a rate still supportive of consumer spending. The distinction matters: slower wage gains ease inflation pressure, while the aggregate income pool keeps households spending, which is the mechanism that has kept the expansion going.
