U.S. Job Growth Surprises in September But Unemployment Hits Four-Year High

20 November 2025

The U.S. labor market returned a somewhat mixed signal in September 2025, showing modest net job growth while also recording a rise in the unemployment rate to 4.4 %, the highest since October 2021. According to data released by the Bureau of Labor Statistics (BLS), non-farm payroll employment increased by 119,000 jobs in September, far exceeding economists’ expectation of around 50,000. Yet at the same time, August’s previously reported gain was revised into a loss of 4,000 jobs, underscoring underlying labor-market fragility.

The increase in employment was led by the healthcare sector, which added 43,000 jobs, followed by gains of 37,000 in restaurants and bars and 14,000 in social-assistance services. These figures reflect continued strength in service-industry hiring. Yet the transportation and warehousing sector lost 25,000 jobs, and federal employment continued its steady slide, shrinking by about 3,000 in September and contributing to a total decline of 97,000 federal workers since January.

The larger story behind the figures lies in the interplay of labor-force dynamics. In September, the unemployment rate’s rise was driven not necessarily by widespread layoffs but by a surge in the number of people entering the labor force around 470,000 while only 251,000 found employment in the household survey. That gap points to a scenario in which more Americans were actively seeking work, possibly encouraged by hiring signals, but the pace of job gains did not fully keep up.

The report had been delayed by 43 days because of the historic federal government shutdown, which halted the collection of several key metrics including the household survey that determines the unemployment rate. The result is that October’s report has been deferred and will be combined with November’s data, leaving policymakers with a thin slice of recent labor-market clarity ahead of the major central-bank meeting in December.

From the viewpoint of monetary policy, these job market developments reinforce caution. The uptick in the jobless rate weakens the argument for imminent interest-rate cuts by the Federal Reserve, while the stronger-than-expected job additions suggest the economy retains some resilience. Fed officials have repeatedly emphasized the need for confidence in inflation’s trajectory before easing policy. One economist described the release as providing “both the hawks and the doves something to confirm what they thought,” reflecting the ambiguity the data presents.

Despite the headline number beating expectations, the quality of job gains raises questions. Wage growth slowed significantly, with average hourly earnings rising only 0.2 % for the month and 3.8 % year-on-year. Given that inflation remains elevated, real earnings growth is modest at best. Meanwhile, the labor-force participation rate remains relatively low, and structural factors such as reduced immigration and increased automation via artificial intelligence are projected to weigh on labor-demand growth. Some analysts now estimate that only 30,000 to 50,000 jobs per month are needed to keep up with population and labor-force growth down from 150,000 monthly in 2024.

For the broader economy the report conveys a picture of steady but slowing momentum. Service sectors continue to hire, but manufacturing and goods-distribution roles are facing headwinds. Meanwhile, the slack in the labor market may be quietly increasing even if it is not or not yet expressed in widespread layoffs. A strategist noted that the dated nature of the data leaves the Fed in a “conundrum,” with little fresh evidence to support a definitive policy move.

Overall, the September employment report offers a snapshot of a labor market in transition: resilient enough to avoid collapse but not strong enough to signal a robust broad-based recovery. For workers, the environment remains challenging given weak wage growth and still-tight hiring processes in many sectors. For businesses and policymakers, the message is one of continued caution: the labor-market engine is still running, but the gears are grinding. With data for October unavailable and the effects of automation and demographic change becoming more apparent, all eyes will be on the next release and whether the underlying dynamics begin to shift more decisively.