The U.S. economy added 29,000 new jobs in September, and the unemployment rate rose to 4.2%.
Economists had expected the economy to add 85,000 jobs and the unemployment rate to hold steady at 4.1%.
The U.S. labor market has undergone a major shift away from an immigrant-driven workforce. Economists say the jobs data, which may appear lackluster compared with recent years, may actually show healthy or even strong growth under the current circumstances.
Employment numbers for previous months were revised downward. July is currently recording a decrease of 10,000, down from an increase of 21,000. The increase in August was revised to 133,000 from 162,000.
Private sector gains were stronger than overall gains. Private employers added 46,000 employees. Goods production jobs increased by 18,000. Durable goods manufacturing added 8 million jobs, and construction added 11 jobs. The economy’s services sector added 28,000 jobs. Government employment fell by 17,000.
The number of labor force increased by 485,000 in September. The labor force participation rate increased by 0.2%.
The slight increase in the unemployment rate in September was due to people entering the labor force, not because people were losing their jobs.
Many economists now estimate that the so-called “break-even” employment growth rate—the rate needed to prevent unemployment from rising—could be as low as zero. Others estimate that 10,000 to 55,000 jobs could be created. So even if the U.S. unemployment rate doesn’t rise, some months could see negative wage changes. In comparison, when immigration levels are higher from 2021 to 2024, the economy would need to add more than 100,000 jobs per month to keep up with the growth of the labor force.
Retirement also pulls down labor force growth, as more baby boomers leave the workforce and smaller generations are unable to fully replace them.
This month’s report is critical for the Fed and markets. Investors are uncertain whether the Federal Reserve will raise interest rates for a second time or keep rates unchanged at its meeting later this month. Weaker-than-expected job growth may convince some policymakers that the Fed can be patient as it raises interest rates.