U.S. added just 29,000 jobs in final report before midterms as unemployment rises to 4.2% under Trump

The U.S. labor market slowed sharply in September, with employers adding just 29,000 jobs as the unemployment rate edged higher. The report provides a mixed picture of the economy heading into the November midterm elections, with hiring subdued but layoffs still relatively low.

According to the Bureau of Labor Statistics, the 29,000 nonfarm jobs in September are far below the roughly 90,000 jobs economists surveyed by Reuters had expected. The increase also represented a sharp slowdown from August, when payrolls rose by a revised 133,000.

The September figure was the final monthly employment report scheduled to be released before the Nov. 3 midterm elections. That timing puts additional attention on the numbers as voters assess the state of the economy and the job market.

Earlier job gains were revised lower

The September report also showed that the labor market had been weaker in the preceding months than initially reported.

July payrolls were revised from a gain of 21,000 to a loss of 10,000, while August was revised from 162,000 jobs to 133,000. Together, the revisions reduced reported employment gains for July and August by 60,000 jobs.

That means the September slowdown was not simply an isolated monthly decline in hiring. The revised data also showed less job creation during the summer than previous estimates had indicated.

Unemployment edged up to 4.2%

The unemployment rate rose to 4.2% in September from 4.1% in August. The number of unemployed people stood at about 7.1 million, while the unemployment rate has remained within a relatively narrow 4.1%-to-4.3% range since March.

The labor force participation rate was 61.8%, little changed over the month. The employment-population ratio was also broadly stable.

That helps explain why economists have described the report as evidence of a slower labor market rather than a sudden collapse in employment.

Hiring remained concentrated in several industries

Healthcare continued to add jobs in September, although its pace slowed compared with earlier in the year. The sector gained 17,000 positions, with increases in ambulatory health care services and hospitals.

Manufacturing added 9,000 jobs, while construction employment also increased. Government employment, however, declined, contributing to the weak overall payroll figure.

The BLS said employment in most major industries changed little during the month, reinforcing the picture of an economy in which businesses are largely holding employment levels steady rather than rapidly expanding or cutting staff.

Wage growth slowed as the labor market cooled

Average hourly earnings for private-sector workers increased by 5 cents, or 0.1%, in September, reaching $37.81. Over the previous 12 months, average hourly earnings increased 3.0%.

That annual wage increase was slower than the 3.1% increase recorded in August and came as inflation remained elevated. The combination means workers continued to face pressure on purchasing power even as nominal wages increased.

The weaker wage growth also matters for the Federal Reserve because slower wage gains can reduce concerns that labor costs are adding to inflationary pressure.

Economists have characterized the current environment as a “low-hire, low-fire” labor market. Employers are not adding workers rapidly, but there also has not been a broad wave of layoffs.

Reuters reported that first-time applications for unemployment benefits have remained very low, while corporate profits and domestic demand have remained relatively resilient. Economists also noted that September’s unusually late Labor Day may have affected the monthly payroll reading.

Olu Sonola, head of U.S. economics at Fitch Ratings, described the report this way: “This is a disappointing jobs report and a reminder that the low-hire, low-fire labor market never went away.”

The report could affect the Fed’s next rate decision

The softer employment data has implications for the Federal Reserve’s interest-rate debate. Slower hiring, higher unemployment and moderating wage growth provide less evidence of an overheating labor market.

Reuters reported that the data reduced expectations for another rate increase in October, although inflation remains a key consideration for policymakers.

The jobs report therefore presents a difficult balance for the Fed: The labor market is cooling, but inflation has not returned completely to the central bank’s comfort zone.

An economic challenge heading into the midterms

Because this was the last monthly jobs report before the Nov. 3 elections, the figures are likely to become part of the economic debate between the two parties. The report does not by itself establish the causes of the slowdown or determine how voters will respond to it, but it provides a new snapshot of the labor market immediately before the election.

The political significance is heightened because economic conditions are an important part of the broader debate over the Trump administration’s record. Coverage of the report has noted that Republicans are campaigning on their economic agenda while Democrats can point to the weaker hiring numbers and the rise in unemployment.

At the same time, the 4.2% unemployment rate remains relatively low by historical standards, and the BLS data do not show a broad-based surge in layoffs. Those details provide important context alongside the headline 29,000-job increase.

Taken together, the September figures point to a labor market that has lost momentum without showing the characteristics of a sharp downturn.

Job creation was substantially weaker than expected, earlier payroll figures were revised lower, unemployment moved up and wage growth slowed. Yet the unemployment rate remains in a narrow range, layoffs have not surged and several sectors, including health care, construction and manufacturing, continued to add jobs.

The result is a more nuanced picture than either a booming labor market or an outright jobs crisis: employers appear increasingly cautious about hiring, while workers continue to face a relatively low-hire environment as the U.S. heads toward the midterm elections.

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