U.S. hiring expected to have slowed in September; unemployment at 4.1%

Job growth in the United States is expected to have slowed markedly in September, while the unemployment rate likely stayed at 4.1% for a third straight month, as Reuters reports — a sign that the American labor market is closing the third quarter in a steady state, but with ever more visible signs of fatigue.

According to a Reuters survey, nonfarm payrolls are expected to have risen by 90,000 jobs in September, after a surprise increase of 162,000 in August — the biggest gain in five months, which many economists attribute partly to seasonal-adjustment swings. Economists’ estimates ranged from 35,000 to 180,000, and the August figure is expected to be revised down. RSM chief economist Joe Brusuelas expects the report to reaffirm the American “low-hire, low-fire” labor market, emphasizing that the U.S. is at full employment and that nothing in the report will change the Federal Reserve’s inclination toward one more interest-rate hike this year. Wages are expected to have risen 3.2% year-on-year in September, from 3.1% in August — a pace suggesting the labor market is not a source of inflation. As Citigroup economist Veronica Clark notes, low unemployment driven by demographics is not necessarily a tight labor market.

Seasonal adjustment remains a major question mark. According to Barclays economist Marc Giannoni, seasonal factors exaggerated the August gain: with last year’s August seasonal factors, August would have recorded a decline of 74,000 jobs. Meanwhile, it remains unclear when the end of Temporary Protected Status (TPS) for hundreds of thousands of Haitian migrants will show up in the employment data. Bank of America economist Shruti Mishra expects a soft headwind spread over several months, not a one-time shock. The immigration crackdown, deportations and the wave of retirements have sharply shrunk labor supply, keeping unemployment low — but the economy needs 50,000 to 80,000 new jobs a month to keep pace with working-age population growth.

On the external side, pressure is building. There are still no signs that the U.S. and Israel’s war with Iran is disrupting the labor market, but headwinds — high energy prices, record diesel prices and supply-chain concerns — are expected to start being felt by the end of the year. Thursday’s Institute for Supply Management (ISM) survey showed rising anxiety among manufacturers over the trade war with Canada, while tariffs remain a source of concern. On the other hand, strong corporate profits and steady domestic demand are protecting workers from layoffs; layoffs at historically low levels explain the stability, even though hiring remains modest. As Boston College professor Brian Bethune warns: “I wouldn’t be surprised if hiring hits the wall next month.”

By sector, a softening is expected in leisure and hospitality and in local education, after August’s large gains. Construction remains strong, driven partly by investment in artificial-intelligence data centers, while manufacturing is heading for a fourth straight month of double-digit gains, also helped by AI infrastructure. The Bureau of Labor Statistics (BLS) releases the official employment report on Friday (today, October 2). Last month, the Fed raised its benchmark rate by 25 basis points to 3.75%–4.00% — the first increase in three years — and signaled further hikes, but markets now price only about a 28% chance of another hike at the October 27–28 meeting, down from about 69% a week earlier, according to CME’s FedWatch tool.