Job Gains Rebounded in September; Rising Unemployment Signals Caution

U.S. payrolls grew by 119,000 jobs in September, according to an overdue report from the U.S. Bureau of Labor Statistics (BLS). 

Issued nearly seven weeks late due to the government shutdown, the report is the strongest since April, a surprise to many. Employment for July was revised down by 7,000, from 79,000 to 72,000, and the change for August was revised down by 26,000, from 22,000 to -4,000. 

The unemployment rate for September edged higher to 4.4% from 4.3% in August, the highest since October 2021.  

“Old news is still news,” said Daniel Zhao, chief economist at Glassdoor. “The latest data does give us some confidence that the job market was not sharply deteriorating right before the government shutdown began at the start of October. However, it doesn’t tell us how the job market has weathered the shutdown since then. The jobs data seems to point to a slight improvement in the job market from a sluggish summer, but the rising unemployment rate is a warning indicator blinking softly.” 

The labor market seems to have continued to chug along in September, said Nicole Bachaud, labor economist at ZipRecruiter. But the downward revisions to July and, especially, August dampen the impact of September’s relatively stronger numbers, she said.   

“And with the government shutdown possibly impacting October business activity and eliminating the October jobs report entirely, it is too soon to tell what the next step for the labor market will hold,” she said. 

Cory Stahle, senior economist at Indeed, pointed out that U.S. employers have added an average of 76,000 jobs per month, roughly in line with the updated estimates of job creation needed to keep pace with population growth.  

“But as immigration and job gains continue to slow, both sides of the labor market are adjusting and that breakeven number is becoming harder to calculate,” he said. “The pervasive uncertainty that is paralyzing the labor market appears likely to carry forward into 2026.”  

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The September data will likely do little to help the Federal Reserve make a decision about interest rates. Some policymakers have called for leaving rates where they are, while others are pushing for a rate cut in December. 

The BLS announced that the October data will not be published, meaning that there won’t be anything near a complete picture of fall labor market trends until the November data is issued Dec. 16. 

“The Dec. 16 release will still bear the imprint from the shutdown and furloughed federal workers,” Zhao said. “So, we will have to wait until the [January release] for a clean read on if the job market has been able to shrug off the effects of the shutdown.” 

Industry Breakdown

Stahle noted that the roughly seven-week delay of the data limits its usefulness for assessing current conditions, but it “does show that the sectors of the economy that were strong prior to the shutdown — health care and hospitality — remained strong through at least the early fall, even as other fields continued to weaken.” 

Health care employment rebounded from August, adding 43,000 jobs, right in line with the sector’s 12-month average of 42,000, Bachaud said.  

Gains were reported in leisure and hospitality (47,000 jobs added), construction (19,000), retail (13,900), and state and local government (25,000). 

“Restaurant job growth rediscovered some momentum in the third quarter, rebounding from a sluggish first half of the year,” said Chad Moutray, senior vice president and chief economist at the National Restaurant Association. 

Restaurants and bars added 36,500 jobs in September, the strongest monthly employment increase in six months and the second-largest gain of the year thus far, Moutray said.  

“In total, restaurants added nearly 68,000 jobs in the third quarter as the July and August readings were also revised higher,” he said. “To be sure, restaurant job growth is still somewhat dampened in 2025 compared to recent years, but the slowdown was much less severe than the preliminary data suggested.” 

Bachaud said that employment gains were partially offset by losses in transportation and warehousing (-25,000) and professional and business services (-20,000), among other sectors.   

Federal government employment declined by 3,000 in September and has shed 97,000 jobs since January. 

“Coming off the record-breaking shutdown, it is likely that quits, which are up more in federal government than any other industry, will continue to rise in the federal sector, impacting even more jobs in the months to come,” she said. 

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Unemployment Rises

The number of unemployed people in the U.S. now stands at 7.6 million, up from 6.9 million last September. Unemployment ticked up to its highest level in four years, while the broader measure that includes those not looking for jobs and those working part time for economic reasons dipped to 8%. 

“Rising unemployment is not in dangerous territory yet, but the upward climb is concerning,” Zhao said. 

Bachaud added that long-term unemployment remains elevated, with 1.8 million people out of work for 27 weeks or more, representing nearly a quarter of all unemployed workers.  

“This persistent challenge underscores the difficulty job seekers face in today’s market, even as some sectors show pockets of strength,” she said. “Before the data delays from the shutdown, there were more unemployed people than there were job openings, underscoring the challenge for currently unemployed workers to find a role in this low-hire environment.” 

Separately, the U.S. Department of Labor released updated weekly jobless claims that suggest layoffs did not rise sharply during the government shutdown. But the report also showed that the number of continuing unemployment claims, a measure of the size of the unemployed population, rose by 28,000 to 1.9 million.  

“If job growth cools while unemployment holds steady or declines, policymakers can take some comfort that workers are still finding opportunities,” Stahle said. “If, on the other hand, falling job gains are accompanied by rising unemployment, it would suggest that job opportunities are fading faster than the supply of workers, which is much more concerning.”