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No official payroll employment data are available during the government shutdown, but it appears that hiring may have picked up slightly in September, after only 22,000 jobs were added in August. Guesstimates are that 50,000 jobs were added in September. When released, October data is likely to show a net job loss, given that 100,000 or so federal workers who took buyouts earlier in the year will be removed from the federal job rolls for the first time.
Data that are available appear to indicate a leveling off, rather than further deterioration. State initial unemployment claims excluding government workers have not picked up, and WARN notices, which are required when companies are announcing large layoffs, have not risen, either. But Indeed.com job postings, which tend to track the official job openings data, have continued to trend down. That indicates the current low hiring environment is likely to continue.
Few sectors appear to be adding jobs outside of health care and social assistance. The unemployment rate has likely edged up to 4.4%, and the length of time workers are staying unemployed on average likely remains elevated, as is the number who are forced to work part-time because of poor economic conditions. The unemployment rate is likely to continue to edge up through the first half of next year, peaking at 4.7% before retreating to 4.5% by year-end 2026.
Wage growth was reported in August to be 3.7% at an annual pace, and is expected to slow to 3.5% by the end of the year. Wage growth tends to lag other labor market indicators.
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Consumer and business uncertainty about the economy will continue to delay hiring plans and should slow future pay gains. Hiring is often deferred when consumers are concerned about losing their jobs, or when businesses don’t know if there will be a positive return to investing in additional workers. Prior to the tariffs, we expected monthly job growth of about 150,000 new positions to continue. Now, job growth could disappear almost entirely if enough employers decide to hold off on hiring while they sort out the effects of the new tariffs on both their businesses and on the economy as a whole.
The payroll employment release is important to the Federal Reserve for two reasons: First, one of the Fed’s two mandates is to support employment. Second, employment is a more reliable indicator of recession than the initial GDP estimates. The Fed needs accurate employment numbers to tell it when to either step on the gas or hit the brakes by cutting or raising interest rates. Currently, the Fed is expected to stay on the gas at its policy meetings on October 29 and December 10 with quarter-point cuts, based on the current best guess that job market weakness is continuing.
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