Why is US unemployment rate rising? September's jobs report indicates 'below expectations' hiring slowdown

The US labor market witnessed low hiring in September this year. The employers added only 29,000 jobs and the unemployment rate moved to 4.2% from 4.1% in August. The result was below the roughly 90,000 jobs economists expected. The Labor Department also revised July and August employment down by a combined 60,000 jobs. Average hourly earnings increased 3% year on year, the slowest annual increase since May 2021. The report comes ahead of the November 3 midterm elections and as Americans continue to express concerns about living costs and employment prospects.

Why is US unemployment rate rising?

The September jobs report showed that payroll employment rose by 29,000. This was below the 133,000 revised rise recorded in August and below economists' expectation of about 90,000.


The unemployment rate rose to 4.2%. The official Labor Department report said that unemployment remained contained within a narrow 4.1%-4.3% range since March. About 7.1 million people were unemployed in September.

What caused the increase in unemployment?

One factor was people entering the labor market. The supplied report said that 485,000 people entered the workforce and not all found jobs straight away. The latest BLS release however reports that the civilian labor force fell by 236,000 in September, so the labor-force explanation differs between reports.

Government employment fell by 17,000 and professional and business services lost 9,000 jobs. Healthcare added 17,000 jobs, but that was below its average monthly gain of 33,000 over the previous year. Construction added 11,000 jobs and manufacturing added 9,000.

Economist Bradley Saunders of Capital Economics said that the healthcare slowdown might be related to the Trump administration's revocation of work authorizations for 350,000 Haitians. It is an economist's interpretation of the employment data.

Jobs, markets and consumer confidence

The US labor market has faced trade disputes, inflation, high interest rates and inflated energy costs associated with the conflict with Iran. The September report was the last jobs report before the November 3 midterm elections. After the report S&P 500 and Nasdaq futures jumped and Treasury yields moved lower.

A Conference Board index fell to its lowest level in more than a decade. More than 28% of respondents expected fewer jobs to be available in six months compared with 14% expecting more. Glassdoor's employee confidence index has also dropped to its lowest level since records began in 2016. Chief economist Daniel Zhao said workers are concerned about layoffs and AI.

Low-hire, low-fire job market

The current labor market has been dubbed by economists as a "low-hire, low-fire" market. Employers are not laying off large numbers of workers but are also hiring fewer people.

The Labor Department's gross-hiring measure has been weak for more than two years. In August, the average unemployed person had been without work for more than six months, the longest average since February 2022.

This situation has also made workers less likely to quit. Glassdoor's Zhao said workers may feel that there are fewer opportunities to find jobs with higher pay or better work-life balance.