United States: Hiring Disappoints in September

Hopes that the labour market was experiencing a sustained rebound and that the weakness seen in early summer had been only temporary have been completely upended by today’s data. Until proven otherwise, August’s strong result now appears to have been the outlier. With the consensus forecast calling for 90,000 hires (and our own forecast even higher), the meagre net gain of 29,000 jobs is very disappointing. Moreover, revisions to the July and August data were also negative, reducing employment by a total of 60,000 positions compared with the figures reported a month ago.

This weakness contrasts with other labour market indicators, which is why expectations for September hiring had been relatively high. The clearest positive signal comes from the low level of weekly unemployment insurance claims. They have hovered around 200,000 for the past two months, compared with more than 230,000 a year ago. Layoff announcement data have also remained subdued, while ADP’s weekly private-sector employment data had been fairly encouraging. One of the few indicators that foreshadowed today’s disappointing result was the deterioration in households’ perceptions of how easy it is to find a job, according to the Conference Board’s Consumer Confidence Index released three days ago.

The weakness in September hiring was fairly broad-based. Of the 250 industries tracked, only 49.0% recorded an increase in employment, the lowest proportion in a year. This stands in sharp contrast to the previous month’s 57.6% reading, which was the highest in three years. Hiring growth in both goods-producing industries and private services slowed by half between August and September. Manufacturing employment continued to rise, but at a much slower pace despite a rebound in the auto sector. Information, financial services, professional services and government all recorded net job losses in September. In some cases, this may reflect the continuation of a longer-term trend that could be related to the disruptions caused by the growing use of artificial intelligence.

The household survey paints a better picture despite the increase in the unemployment rate, its first since February. The rise reflects a larger increase in the labour force (+485,000) than in employment (+406,000). However, as is often the case with this highly volatile survey, these movements appear exaggerated, and declines of a similar magnitude could well occur in the coming months. 

It is difficult to form a clear view of the labour market’s underlying trend, as the data continue to send mixed signals. Nevertheless, the September figures fell short of expectations and interrupted the momentum that August’s results had appeared to signal. Data released over the next few months will hopefully provide a clearer picture of the trend. The situation is also likely to complicate matters for Federal Reserve officials. In this context, their upcoming decisions should be guided primarily by inflation developments and the inflation outlook.