U.S. Hiring Slows Sharply as Wage Growth Hits Five-Year Low
The US labour market experienced a slowdown in September, with the economy adding only 29,000 jobs, while the unemployment rate rose to 4.2%, according to new data released by the Bureau of Labour Statistics on Friday. The latest jobs report – the final official employment snapshot before the midterm elections – indicated that hiring in recent months was weaker than previously estimated, and wage growth has decelerated. This development places Americans’ pay cheques in a precarious position as inflation continues to rise. Through September, the economy has experienced an average addition of 68,000 jobs per month, according to data. That is an improvement compared to last year, when fewer than 10,000 jobs were added per month; nevertheless, the current hiring rate remains significantly below pre-pandemic averages. Overall, it continues to be a “low-hire, low-fire” labour market experiencing a structural transformation due to an ageing population, a rise in Baby Boomer retirements, a decrease in immigration, and the progression of artificial intelligence. “We are just seeing the labor market holding up,” said Kory Kantenga. “It’s a slow labor market, hiring’s still slow, we still see elevated competitiveness, job seekers still have low confidence; but we don’t see any red flags that the labor market is getting worse.”
September’s job gains indicated a deceleration compared to August, during which a downwardly adjusted total of 133,000 jobs were recorded. (Economists had previously cautioned that August’s surprisingly strong gains likely reflected some seasonal factors that overstated hiring activity.) Additionally, July experienced a downturn, resulting in a loss of 10,000 jobs, a reversal from the previously reported gain of 21,000 jobs. Employers were anticipated to create approximately 90,000 jobs in September, while the unemployment rate remained steady at 4.1%. Unemployment increased in September, partly due to a rise in the number of individuals entering or re-entering the labour force. The labour force participation rate increased last month. The annual rate of wage growth has decelerated for the fourth consecutive month, reaching 3% in September, marking the lowest level since May 2021. The job market has largely remained resilient in the face of an increasing array of challenges to employment, including demographic shifts due to an ageing population, the swift integration of artificial intelligence, rising oil prices, policy ambiguities, and the ongoing conflict with Iran.
Healthcare, supported by an increasing demographic requiring additional medical services, has significantly contributed to employment growth in recent years and maintained this trend in September. Healthcare and social assistance added 23,000 jobs, reflecting a modest increase for a sector that previously averaged 57,000 jobs per month last year. “We’re seeing healthcare hiring slow,” Kantenga told in an interview. “If we keep going in the direction that we’re going today, it’s certainly a more fragile labor market.” The construction sector recorded employment gains for the seventh consecutive month, with an addition of 11,000 jobs. The majority of the increases originated from the non-residential sector, likely indicative of substantial investments in AI-related infrastructure, including data centers. The manufacturing sector continued its trend of employment growth for the fourth consecutive month, with an addition of 9,000 jobs in September. Nonetheless, data from the Bureau of Labour Statistics indicates that a greater number of industries experienced job losses compared to those that created new positions. The public sector – primarily state and local governments – experienced a reduction in employment last month, alongside a decline in white-collar industries including information, professional and business services, and financial activities.
Notably, the professional services sector experienced a decline, primarily driven by temporary help services, which recorded a net loss of 10,900 jobs. “This may signal weakening demand for hiring in the coming months,” economist Nicole Bachaud wrote Friday. “Instead of changing headcount for their permanent workforce, employers often turn to temp services to scale up and down more quickly, to be able to respond to changing economic conditions.” Equities advanced while bond yields declined as market participants reduced their expectations for an interest rate increase by the Federal Reserve at its upcoming meeting. Treasury yields experienced a decline, with the pivotal 10-year yield decreasing to 5.21%. Nevertheless, it remains at elevated levels not seen in several years. “Today’s report may revive the ‘bad news is good news’ narrative, but hoping for a weaker labor market just to secure easier financial conditions is a poor tradeoff,” Bret Kenwell said in a note. “Lower rates may support markets in the near term, but a meaningful deterioration in hiring and income would eventually weigh on consumer spending and economic growth,” he said. “Inflation remains a problem, but a breakdown in the labor market would create an entirely different one.”
The stability of the labour market presents favourable conditions for the Federal Reserve, enabling central bankers to maintain a concentrated approach toward inflation. However, the employment figures released on Friday are likely to exacerbate the prevailing negative sentiment among Americans regarding the economy, as noted by Heather Long. “Americans are frustrated by the lack of opportunities right now,” she wrote. “Wage growth fell to a new 5-year low and is being wiped out entirely by inflation. That stings heading into the holidays.” The latest jobs numbers fell short of expectations and underscore the constraints in labour supply; nevertheless, inflation continues to be the primary concern going forward, stated Mike Reid. “It’s a combination of tariffs still being in play and energy costs starting to spill over,” he said, noting elevated freight costs. “The real challenge for the US economy is the inflation pipeline is heating up.”
