US Labour Market Softens as Jobless Rate Climbs, Bolstering the Outlook for Bonds
America’s long-delayed labour market report has finally emerged, seven weeks overdue, offering a headline that looks steady while the underlying trend grows unmistakably weaker. September’s payrolls, postponed by the government shutdown, showed a 119,000 rise in non-farm jobs — slightly above expectations but increasingly at odds with the broader direction of the economy.
Unemployment climbed to 4.4 per cent, the highest level in four years, and its upward trajectory is now clearly established. The timing is unhelpful. With October’s data lost entirely during the shutdown, the next full reading will not appear until mid-December, leaving policymakers and investors facing one of the largest information gaps in recent memory at a moment when visibility is vital.
Revisions added to the softer tone. Job gains for July and August were reduced by more than 30,000 in total, extending a year-long pattern in which early estimates have overstated labour market strength. What previously appeared to be a stable, if subdued, summer now looks materially weaker.
The two main labour market surveys continue to diverge. The establishment survey delivered the 119,000 payrolls figure, but the household survey reported simultaneous increases in employment and unemployment, driven partly by higher participation. The year-to-date contrast is stark: payrolls suggest the economy has added more than half a million jobs; the household survey implies total employment has fallen by roughly a quarter of a million. Full-time employment is down by more than 700,000 since January, indicating a shift towards part-time and lower-quality roles rather than genuine labour market expansion.
Even September’s reported rebound in full-time jobs — more than 650,000 — sits uncomfortably alongside widespread hiring freezes and restructuring. Volatile swings in part-time work, combined with reliance on statistical adjustments such as the “birth–death” model, heighten doubts about data reliability at a time when agencies are still clearing a backlog.
Wage data did little to reassure households or investors. Average hourly earnings rose by nine cents to $36.67, a 3.8 per cent annual increase, yet continue to lag the inflation categories that dominate everyday spending. The average workweek held at 34.2 hours, while manufacturing hours edged slightly lower. Small reductions in hours, when spread across an economy of more than 160 million workers, translate into a meaningful fall in aggregate income — a quiet tightening that typically precedes outright job losses.
Alternative indicators point to further cooling. Real-time private-sector data suggests job creation has recently turned negative, while layoff announcements have risen to their highest level in two decades, led by technology and industrial companies responding to weaker demand and tighter financial conditions.
For the Federal Reserve, the message beneath the statistical noise is increasingly clear: the labour market is weakening, and the rise in unemployment is becoming firmly established. A labour market losing traction strengthens expectations of rate cuts in 2026 and underpins the ongoing rally in US government bonds. Rising joblessness, persistent downward revisions and softer wage pressure together create a distinctly bond-friendly backdrop, suggesting not a crisis but an economy gradually losing altitude — and an interest-rate path now turning decisively more supportive of lower Treasury yields.
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