Comment by Christian Scherrmann, DWS Chief U.S. Economist

Christian Scherrmann

The long-awaited release of the September labor market report showed a decent rebound in hiring. Total nonfarm payroll employment increased by 119,000 jobs in September. Employment gains occurred in healthcare (+43,000 jobs), food services and drinking places (+37,000 jobs), and social assistance (+14,000 jobs). Meanwhile, job losses were reported in transportation and warehousing (-25,000 jobs) and in the federal government (-3,000 jobs). The unemployment rate increased by 0.1% to 4.4%, due to an increase in labor force participation (up 0.1% to 62.4%), which was evenly distributed between employment and unemployment. Average hourly earnings increased by 0.2%, indicating no price pressure from reduced migration.

The October data will be released with the November report on December 16, so central bankers will not receive an update before their next policy meeting. Although the uptick in the unemployment rate in September justified the rate cut in October from an insurance standpoint, decent hiring and the lack of timely data make it difficult for central bankers to normalize monetary policy quickly. Overall, the report supports our view that central bankers will maintain the status quo in December. Nevertheless, we remain optimistic that the Fed will lower policy rates to neutral by 2026, as the effects of tariffs on inflation should fade, though weakness in the labor market is likely to persist.