US employment data: What to expect from September’s jobs report

The US labour market is expected to show slower job growth in September, with economists forecasting a gain of 90,000 nonfarm payrolls, down sharply from the 162,000 increase recorded in August.

The unemployment rate is expected to remain steady at 4.1 per cent for the third consecutive month, suggesting that the labour market remained relatively stable as the fourth quarter began.

The September employment report, due from the US Bureau of Labour Statistics, will be closely watched for clues about the Federal Reserve’s next interest rate decision.

US job growth expected to slow

Economists surveyed by Reuters expect nonfarm payrolls to have increased by 90,000 in September, with estimates ranging between 35,000 and 180,000.

The August jobs increase was unusually strong and is expected to be revised lower. Economists have pointed to seasonal adjustment factors as one reason behind the sharp jump.

Marc Giannoni, chief US economist at Barclays, said seasonal adjustments may have significantly exaggerated August’s employment gain.

Unemployment rate likely to hold at 4.1%

The unemployment rate is forecast to remain at 4.1 per cent, even as hiring moderates.

Economists estimate the US economy needs to add around 50,000 to 80,000 jobs every month to keep pace with growth in the working-age population.

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However, economists cautioned that a low unemployment rate does not necessarily mean the labour market is tight. Worker retirements and tighter immigration policies have reduced labour supply, helping keep the jobless rate contained.

Wage growth in focus

Wage growth is expected to accelerate slightly, with average hourly earnings forecast to rise 3.2 per cent year-on-year in September, compared with 3.1 per cent in August. Economists will closely monitor wage growth because it provides an important signal about inflationary pressure and the strength of the labour market.

AI investment supports jobs

The US artificial intelligence investment boom is expected to continue supporting employment in construction and manufacturing. Construction payrolls are forecast to post another strong increase, partly driven by the construction of data centres needed for AI infrastructure.

Manufacturing is also expected to record its fourth consecutive month of double-digit employment gains, with AI-related infrastructure investment contributing to demand.

Fed policy in focus

The jobs report comes after the Federal Reserve raised its benchmark interest rate by 25 basis points in September to a range of 3.75-4.00 per cent. Markets have since reduced expectations for another rate hike in October following cooler-than-expected inflation data.

The September jobs figures could therefore provide fresh clues about whether the Fed maintains its tightening stance or reassesses the outlook for interest rates.