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The Line: Unemployment Fell to 3.5% in September

Gregory Heym is Chief Economist at Brown Harris Stevens. His weekly series, The Line, covers new developments to the economy, including trends and forecasts. Read on for the latest report and subscribe here to receive The Line in your inbox.





The labor market to the rescue again! With all the bad economic news out there, we continue to rely on the monthly jobs report to calm us down. September’s report didn’t disappoint, as 263,000 jobs were added last month. Yes, this is the fewest jobs added since April 2021, but it’s still a very strong number considering everything going on right now. Economists had been expecting something in the range of 250,000-275,000, so this was not a big surprise. It’s a different story when it comes to the unemployment rate, which fell to 3.5%. Forecasts were looking for an increase to 3.7%, so this is good news up to a point. What do I mean by that, you ask? How can strong job growth and such a low employment rate be bad news? A rate that low combined with over a quarter of a million new jobs will keep the Federal Reserve aggressively hiking rates. There are many people who would have preferred weaker data, in the hopes the Fed would ease up on their inflation-fighting hikes. That’s why stocks opened down sharply last Friday, as we all know the stock market hates rising rates. Other highlights from the September employment report include:

  • The labor force participation rate ticked down to =62.3%, and remains 1.1% lower than before the pandemic. This is a number economists watch closely, as more people entering the workforce would help fill the 10 million open jobs out there, and ease the upward pressure on wages.

  • Wages are up 5% compared to a year ago, well below the increase in prices.

  • The leisure and hospitality sector led job gains with 83,000, but their employment is still 1.1 million lower than before the pandemic.

  • Financial activities lost 8,000 jobs last month.

You can read the full report at this link.


In other job-related news, initial claims for unemployment recently rose, but at 219,000, they remain at historically low levels. We also found out that 4.16 million workers quit their jobs in August, up 100,000 from the prior month. This shows workers still have a lot of power over their employers.


For now, the labor market continues to impress us by adding more jobs than we could have ever imagined, and having an unemployment rate near an all-time low. Sure, we expect job growth to continue to slow down, but keep in mind the U.S. has added almost 3.8 million jobs so far this year. Before 2021, the last time that happened was 1994.


This week, we will get reports on inflation and retail sales, so stay tuned for what could be a bumpy ride.


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