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Job growth came in somewhat stronger than had generally been expected, as the healthcare and social services sector added 57,100 jobs. However, the numbers for the prior two months were revised down by a total of 79,000, bringing average growth over the last three months to 62,000.

With the flow of immigrants into the labor force sharply slowed as a matter of policy, the data in the household survey gives a better measure of labor market strength. The picture there is not good.

The unemployment rate ticked up to 4.4 percent, the highest level since October 2021. The unemployment rate for Black workers remained at 7.5 percent, while the unemployment rate for young workers (ages 20-24) was unchanged at 9.2 percent. This means that the sharp deterioration in the labor market situation reported for these disadvantaged groups reported in prior months was not an aberration. The unemployment rate for Black workers had been at 4.8 percent in April of 2023, and the unemployment rate for young workers bottomed out at 5.5 percent in the same month.

Job Growth Narrowly Concentrated in September Report

Healthcare has dominated employment growth in the last two years, but its importance has increased in 2025. It has accounted for just under two-thirds (66.4 percent) of employment growth in the last three months. Job growth in restaurants accounted for more than all of the rest — 36.3 percent — of employment growth. No other major sector is showing strong job growth.

The federal government lost 25,000 jobs over the last three months, 3,000 in September. Employment is now 90,000 below year-ago levels. With many of the periods of delayed layoffs from DOGE ending in September, there should be a substantial decline in the October number, although that may be affected by the shutdown. State and local governments have continued to add jobs, although at a modest pace of 14,000 a month. That is down from a rate of 25,000 a month in 2024.

Continued Weakness in Manufacturing, Mining, and Construction

Job growth in the goods-producing sectors continues to be weak. The manufacturing sector lost another 6,000 jobs in September. Employment is now down 94,000 from its year-ago level. It now accounts for less than 8.0 percent of total employment.

Mining lost 2,000 jobs in September; employment is down 11,500 from its year-ago level. Construction added 19,000 jobs, but this just reversed losses in the prior three months. The sector has added 38,000 jobs over the last year, an average of 3,000 a month. It had added an average of 18,000 a month in the prior year.

Wage Growth Picks Up Slightly

There was a modest acceleration in wage growth shown in this report. The annualized rate of growth in the hourly wage taking an average of the last three months (July-Sept) with the prior three months (April-June) was 4.0 percent. This is roughly the same as its rate in 2023 and 2024. It had shown some signs of slowing in prior months. The rate of wage growth for non-supervisory workers in the low-paid restaurant sector also picked up to 3.9 percent. It had slowed to 2.2 percent by this measure in the previous three months.

Hours Stagnate

There was a modest rise in the index for aggregate hours in September, but it did not offset the August decline. For the third quarter as a whole, the index was unchanged from its second quarter level. This is a bad sign from the perspective of labor market demand since it means a reduction in hours is offsetting the modest increases in employment. The index of aggregate hours for manufacturing is down a full percentage point from its year-ago level. This is good news from the standpoint of productivity, because it means that the rate of productivity for the quarter will be roughly equal to the rate of GDP growth.   

Rising Unemployment Part of Broader Weakness in Household Survey

The modest rise in unemployment is not by itself a big deal, but it is part of a longer pattern of weakness. The 4.4 percent rate is still low by historical standards, but it is higher than at any point in the two and a half years prior to the pandemic.

In addition to the sharp rise in unemployment for Black and young workers, there are other signs of labor market weakness. The share of unemployment due to voluntary quits rose slightly to 11.8 percent, but that is still down from an average of 13.2 percent in 2018-2019.

The share of unemployment due to permanent layoffs rose 0.8 pp to 35.8 percent, the highest level since December 2021. That compares to an average of 33.3 in 2018-2019.

Unemployment Rate for Asian American Workers Jumps in September

There was an unusual 0.8 pp jump in the unemployment rate for Asian American workers to 4.4 percent in September. This compares to an unemployment rate for whites of 3.8 percent. The rates are usually very close with the unemployment rate for Asian American workers typically being slightly lower. The jump could be an anomaly; there was a big rise in participation in the month, but it is the highest unemployment rate for Asian American workers since August 2021.

Unemployment Rate for College-Educated Workers Rises to 2.8 Percent

There was a modest rise to 2.8 percent in the unemployment rate for workers with college degrees. While still well below the overall unemployment rate, workers with college degrees have been disproportionately hit by the weakening of the labor market. Their unemployment rate is up by 0.5 pp over the last year and 1.5 pp from its recovery low in September of 2022. By contrast, the unemployment rate for workers with just a high school degree is up just 0.2 pp over the last year and it is unchanged for workers with an associate degree.

Self-Employment Drops

The levels of self-employment, both incorporated and unincorporated, are down from year ago levels. For incorporated self-employed the drop is 0.1 percent, while it is 1.2 percent for the unincorporated. Both measures had been rising in 2024. If healthcare insurance through the exchanges becomes harder to get, it is likely to fall further.

More Evidence of a Weakening Labor Market

The rate of wage growth for non-supervisory workers in the low-paid restaurant sector also picked up to 3.9 percent. It had slowed to 2.2 percent by this measure in the previous three months.

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