Final Jobs Report Before Election Day Disappoints

Good Friday evening. The last monthly jobs report before November's midterm elections fell short of expectations, indicating that the labor market in recent months has been softer than previously thought, while wage growth continues to slow. Here's what you need to know.

Unemployment Rate Ticks Higher as Job Growth Slows

U.S. employers added just 29,000 jobs in September, and the unemployment rate rose a tenth of a percentage point to 4.2%, the Labor Department announced Friday. Both results failed to meet expectations, as analysts had projected job growth of about 90,000 and a steady unemployment rate for the month.

Job growth in the previous two months was moved lower, as well, with the numbers for July reduced by 31,000, moving the final tally to a loss of 10,000, and August falling by 29,000 to 133,0000.

The healthcare sector provided the majority of the growth in September, as it has for many months, adding a weaker-than-usual 17,000 jobs. Construction firms created 11,000 jobs, and manufacturers 9,000.

Employment in federal, state and local governments fell by 17,000, while professional and business services firms cut 9,000 jobs.

Wages grew 3.0% on an annual basis, the smallest 12-month gain since May 2021.

What the analysts are saying: Analysts downplayed the miss in the top-line numbers, saying the labor market appears to be holding more or less steady, despite the monthly variations. From July through September, job growth has averaged 51,000 per month, a level many economists see as a stable level in a "low hire, low fire" job market.

"The September employment report came in a little bit softer than expected but overall wasn't too worrying," JPMorgan's Michael Feroli wrote in a note to clients. Feroli pointed out that the unemployment rate rose because 485,000 people entered the workforce, a positive sign about the strength of the economy. And he described the three-month growth average as being "close to most estimates of trend monthly growth in the labor supply, i.e. breakeven job growth."

RSM Chief Economist Joseph Brusuelas said the labor market appears to have settled into a new normal, shaped by political policy and basic demographics. "Growth in the domestic supply of labor will remain soft given the well-known long-term demographic challenges posed by the retirement of baby boomers and restrictive immigration policies," he said in a research note. "Soft readings like September's and an underlying trend of around 50,000 new jobs added monthly will be the norm over the next two years at the least."

Heather Long, chief economist at Navy Federal Credit Union, emphasized the same point. "The September jobs report tells us the 'low hire, low fire' job market is still here," she said on X. "There was hope that hiring was picking up, but it's stabilizing at a low ~50k a month." Long noted that job growth is being driven largely by two sectors: healthcare and the buildout of artificial intelligence infrastructure.

Long added the latest data confirms the worry that millions of American workers are feeling "financial pain," with the lowest year-over-year wage growth in five years (see her chart below). "Inflation has eaten up all wage gains for the average worker since April," she wrote. "Many people are having to make hard choices about what to buy and what to skimp on right now. Yes, consumption is still strong (mainly due to wealthier Americans and people dipping into savings or credit cards), but a lot of people have to think hard about every dollar they spend."

Fed may sit tight: The soft jobs and wage data indicate that the labor market is not contributing to inflation, reducing pressure on the Federal Reserve to raise interest rates at its next meeting at the end of the month.

According to CME's FedWatch tool, traders now assign a 22% chance of a quarter-point rate hike at the meeting, a big drop from the 35% reading a week ago.

"This report strengthens the case for the Federal Reserve to remain patient," said Adam Schickling, a senior economist at Vanguard, per CNBC. "The labor market has not deteriorated sharply, but there is also little evidence that it has meaningfully strengthened, giving policymakers reason to wait for additional data."

US and Allies to Release Diesel Reserves

With diesel prices still hovering near the record highs reached last week, the world's seven leading industrial economies - the United States, Britain, Canada, France, Germany, Italy and Japan - announced Friday that they will release 100 million barrels of diesel and crude oil from their emergency reserves over a four-month span.

"Facing unprecedented volatility in oil markets - with surging prices threatening economic stability and the well-being of our citizens - we have agreed on decisive, coordinated measures to stabilize immediate energy supplies, shield households and businesses from price shocks, and strengthen the long-term resilience of global energy systems," the group said in a statement.

The new plan, to be coordinated by the International Energy Agency, comes after a pressure campaign by the Trump administration, which threatened to ban U.S. diesel exports. The pressure angered European allies, since such a ban would slash diesel supplies to Europe and deliver a painful economic blow. Some economists warned it would ultimately raise diesel prices in the United States as well. As part of its statement Friday, the G7 said that member countries agreed to refrain from export restrictions among the group.

The 100 million barrels to be released are the equivalent of one day's worth of global oil demand, The New York Times notes. The White House is reportedly also preparing an executive order to be unveiled as soon as next week aimed at bringing down diesel prices.

Number of the Day: 30

The new fiscal year started yesterday, meaning that Congress has now officially extended a dismal streak of failures. It has been 30 years since it last passed the required 12 annual funding bills by the beginning of the fiscal year. The House has passed three of the 12. The Senate hasn't passed any. To prevent federal agencies from shutting down once the calendar turned to October, lawmakers passed a stopgap bill extending funding through December 11, meaning that once they return after the midterms, they will have to work out another funding agreement by that deadline.

Fiscal News Roundup

• G7 Nations Will Release 100 Million Barrels of Oil and Diesel Fuel After Prices Soar – Associated Press
• 'Blackmail': Europe Fumes Against White House Demand for More Diesel – Politico
• Trump Says US Won't Ban Diesel Exports – The Hill
• The US Economy Added Just 29,000 Jobs Last Month and the Unemployment Rate Ticked Up to 4.2% – CNN
• US Labor Market Shifts to a Lower Gear – New York Times
• 'God Made Trump' Ad and at Least 12 Others Are Part of Controversial Taxpayer-Funded Ad Campaign – CNN
• Senior House Republican Says Trump's 'Lack of Favorability' Creating 'Tough' Politics – Politico
• 'What Do Those People Do for America?': GOP Targets Wall Street – Politico
• Democrats Push for a Bigger Majority That Would Alleviate Headaches for Hakeem Jeffries – Politico
• Trump Tried to Dismantle Voice of America. Now the Government Is Paying to Rebuild It – Politico
• Musk-Led War Commission Triggers Alarms in Pentagon – Politico
• Senators Give Cold Shoulder to Hegseth Plan to Cut Admirals, Generals – The Hill
• Warsh's Top Fed Deputies Step in to Give Markets a Clear Message – Bloomberg
• DOJ Not Reopening Criminal Probe Into Powell, Blanche Says – Bloomberg
• Your Health Insurance Premiums May Take a Big Jump in 2027 - Here's Why – CNBC

Views and Analysis

• Trump's 'Pitch Perfect' Project Announcements May Be Too Late to Help the GOP – Megan Messerly, Politico
• The Trump Economy: 'The Greatest Story Never Told'? – Ramesh Ponnuru, Washington Post
• This Mistake Doomed Biden. Trump Is Falling Into the Same Trap – Karine Jean-Pierre, New York Times
• New Fox Poll-a Disaster for Trump-Rattles Fox Anchors: "Wake Up!" – Greg Sargent, New Republic
• Why US Diesel Is So Important to Major Trading Partners – Simon Romero, New York Times
• Trump Begs Europe to Help Him Bring Down Diesel Costs He Drove Up – Ellie Quinlan Houghtaling, New Republic
• US Ran a $2 Trillion Deficit Last Year, We Estimate – Committee for a Responsible Federal Budget
• As Bond Yields Rise, the US Is Flirting With Disaster – Bloomberg Editorial Board
• Will America Spend 9% of Its GDP on AI? The Industry Is Counting on It – Greg Ip, Wall Street Journal
• America Wants to Make More Generic Drugs. India Shows Why That's Hard – Alex Travelli, New York Times