Kiplinger Jobs Outlook: Job Gains Return to Earth
Coming monthly jobs reports will likely be better than September’s 29,000, but not by a lot.
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September’s job gain of 29,000 was lower than expected, but future gains won’t be that much higher. Employment growth has clearly downshifted from large, six-digit monthly gains to modest five-digit gains, with the average in 2026 so far running at 68,000. This gradual slowing is expected to continue, as labor force growth has been almost zero since last year.
There were small gains in September in most sectors of the economy: construction, manufacturing, wholesale and retail, transportation, health care, leisure and hospitality, and other services. Small losses occurred in information, banking and insurance, computer system design, temporary help, and federal and state government employment. The biggest reasons for the smaller gain in September compared with August’s 133,000 new jobs was a 13,000 drop in local government employment, plus smaller-than-usual gains in health care and hospitality. August also marked a rebound after the employment decline in July, which stemmed from seasonal adjustments that were likely thrown off after Amazon scheduled its Prime Day sale in June instead of July. In other words, September was probably a return to a more normal hiring pattern after several unusual up or down months.
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The unemployment rate edged up to 4.2% in September. The labor force surged for the second month in a row for unknown reasons, but again, most of these new job seekers found employment, so the labor force participation rate again ticked up, and the number of unemployed workers rose only slightly. Weekly initial unemployment claims remain low overall.
Average hourly earnings rose 3.0% over the past 12 months, but that rate of increase has been trending down this year. Wage gains are not expected to decline further, however, given the cost-of-living adjustments that will boost many paychecks in January. Blue-collar wage gains are running a little higher than overall wage growth, at 3.3%, but they have also been trending down toward 3%.
The weaker September report lowers the chances of an interest rate increase at the Federal Reserve’s next policy meeting, on October 28. But the next inflation report, coming on October 14, will be influential. If that inflation figure isn’t too bad, the Fed will likely skip a rate increase just prior to the November midterm elections, and wait to raise interest rates again at the following meeting, on December 9.
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