U.S. Employment (September 2026)

Payroll growth slows in September, unemployment rate nudges higher to 4.2% 

• Nonfarm payrolls rose by 29k in September, following a gain on 133k in August. This morning's print came in well below consensus which called for a gain of 90k.  
• The prior two months were revised lower by a total of 60k. Over the last three months, payrolls have averaged 51k.
• Private sector hiring rose by 46k, down from August's 89k. Gains were concentrated in health care & social assistance (+23k), though construction (+11k), manufacturing (+9k) and leisure & hospitality (+10k) also chipped in.  
• Public sector hiring fell by 17k, largely due to a pullback in local government (-13k).  
• In the household survey, the labor force (+485k) expanded by slightly more than civilian employment (+406k) – pushing the unemployment rate up by 3 bps to 4.2% (4.175% unrounded). The labor force participation rate rose by two-tenths of a percentage point to 61.8%.  
• Average hourly earnings were up 0.1% month-on-month (m/m), a deceleration from the 0.3% m/m gain in August. The twelve-month change slipped to a five-year low of 3.0%, while the three-month annualized was even softer at 2.4%.   

Key Implications

• From the Fed's standpoint, this was a goldilocks employment report. While job growth moderated relative to August, the three-month moving average suggests hiring is still running close to the breakeven rate. Moreover, the uptick in the unemployment rate was negligible at just 3bps, and it occurred for the "right reasons", with the labor force expanding faster than household employment.  
• Overall, the labor market remains in a good spot. Hiring has improved since last year, but not by so much that it's adding to inflationary pressures. This reduces the urgency for the Fed to follow up with another hike in October, particularly after this week's PCE inflation data came in softer than expected while historical revisions showed a more moderate pace of price growth over the past year. Fed futures are pricing 16% odds of an October hike, but with another CPI report due before the next FOMC meeting, we would still view the October announcement as live. 

 

Disclaimer

This report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.