Return of the Mac(ro) Data - Labor Data has Something for Everyone

The September Employment Situation Summary, originally scheduled for release on October 3, had a little something for everyone. For labor market optimists, the gain of 119k jobs was the highest since April, show ing a strong rebound from August, and brought the three-month moving average above 60k, bouncing back from the prior print. For those wary about the labor outlook, the increase in the unemployment rate to 4.4% points to underlying softness and warrants additional concern. Ultimately, those policymakers advocating for a cut were given a little more ammunition today to make their case. Month to month data is noisy so the pop of 119 k should be taken with a grain of salt. Two of the last four months have displayed net payroll losses and announced layoffs plus the DOGE buyouts biting make October and November’s prints likely to slow from today’s outsized number. Job gains in September were propped up by just a few sectors with Leisure/Hospitality and Healthcare/Education comprising the bulk of the gains. Healthcare/Educatio n’s strength is not a surprise, but the Leisure/Hospitality gains were the best since November 2024 and are unlikely to be repeated going forward. The unemployment rate is less volatile than payrolls. It tends to tell the story of the direction of the labor market. Today’s print is fourth straight month of an increase in the unemployment rate and nearly rounds to 4.5% (4.44%). In the absence of a good target for equilibrium payroll gains, the unemployment rate will give us a better indication of labor market tightness, pressure on wages, and potential feedthrough to inflation and another increase points to additional softness ahead. In sum, today’s data gives more credence to those policymakers advocating for another “insurance cut” that brings the policy rate incrementally closer to neutral.