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September jobs report: Finally, some data

Market response

November 20, 2025 | 2 min read

Seema Shah

Chief Global Strategist

Christian Floro, CFA, CMT

Market Strategist

Magdalena Ocampo

Market Strategist

The September jobs report showed a very robust 119,000 gain in payrolls, topping all consensus expectations and pointing to a rebound following August’s revised contraction. Concerns about a labor market under pressure have swelled since the summer, especially as alternative labor market data and company anecdotes have both pointed to a surge in layoffs. Nevertheless, today’s strong headline number, combined with initial jobless claims that remain contained, helps push back against these concerns and point to a decelerating, but not yet cratering, labor market.

Notably, today’s employment report was originally scheduled for October 3 but was delayed due to the U.S. government shutdown. Though data quality was not impacted—as collection was completed prior to the shutdown—the dated nature of this report may do little to shift the narrative one way or another. Moreover, with the October report canceled and the November report pushed back to December 16, the data fog continues to plague markets and policymakers alike.

Non-farm payrolls

Thousands, January 2022–present

Source: Clearnomics, Bureau of Labor Statistics, Bloomberg, Principal Asset Management. Data as of November 20, 2025.

Report details

Total non-farm payrolls increased by 119,000 in September, well above expectations of 53,000. The August report was also revised lower to a contraction of 4,000 jobs (down from an expansion of 22,000). While payroll reports since the summer have increased fears of a rapidly deteriorating labor market, today’s report may dispel some of those notions. Nevertheless, given the exaggerated backwards-looking nature of the report, some caution is required before extrapolating a new trend.
Overall job growth in September was driven by a rebound in hiring across both structural and cyclical areas of the economy, suggesting the economy was on solid footing when it entered the government shutdown last month. The healthcare and leisure & hospitality sectors continued to lead employment gains, with the latter echoing resilient consumer spending despite softer sentiment. Government hiring also picked up, with gains in state and local jobs, despite ongoing layoffs at the federal level amid the lingering impact of DOGE. Meanwhile, the construction sector reversed some of its August losses, but volatility persists amid elevated rates and housing affordability challenges weighing on residential activity.
On the other hand, professional & business services fell for a fifth straight month, led by ongoing declines in temporary help services. This sector is usually a leading indicator of labor demand, and developments there have been consistent with the narrative of a cooling labor market. Ongoing pressure from trade uncertainty and rising costs associated with tariffs has also likely weighed on manufacturing and transportation & warehousing, which both shed jobs, with the former marking five consecutive months of contraction.
Unemployment rose to 4.4% in September (from 4.3% in August), though this was somewhat tempered by an increase in the labor force participation rate, which signaled entrants into the labor market. Nevertheless, with the duration of unemployment remaining elevated at 10 weeks, overall conditions suggest difficulty in absorbing marginal labor supply. Combined with easing wage growth, it also indicates the labor market continues to soften, albeit far from being recessionary.

Policy outlook

Though the full October employment report will be lost to history, alternative labor market indicators have corroborated the view that the labor market likely slowed in October due to the shutdown. Nevertheless, with fiscal and monetary tailwinds expected to boost economic growth next year, the labor market could bounce back by the early months of 2026.

Overall, though, in the face of increased hawkishness and internal division within the FOMC, and without any further jobs reports ahead of the December FOMC meeting, today’s release is unlikely to tip the balance to a December cut. In any case, a December pause is unlikely to be a critical misstep. Although subdued consumer sentiment underscores concerns about job security, labor market conditions are soft but certainly not recessionary, giving the Fed breathing space to reassess the economic backdrop and act decisively only once it has enough convincing data in hand.

Macro views

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