Hiring slowed in September, revealing economic strains from the Iran war and immigration enforcement and adding to the challenges for Republicans as they fight to keep control of Congress in the Nov. 3 midterm elections.
Employers added 29,000 jobs in September, missing estimates, and job growth over the prior two months was revised down by a combined 60,000 jobs, indicating a labor market that has cooled since earlier this year. The unemployment rate ticked up to 4.2 percent, the Labor Department said in its final snapshot before the election.
The muted job gains remain consistent with a relatively healthy labor market, though current conditions pale in comparison with the massive jobs boom that followed the 2020 coronavirus pandemic. That’s because fewer jobs are needed to keep the unemployment rate low as immigrants facing new restrictions, and baby boomers, exit the workforce, economists say.
But Americans feel worse about the economy now than they did during the pandemic, recent data shows. Stubbornly high inflation, caused in part by the effects of the U.S. war with Iran, is weighing on people’s budgets, especially at the pump. In addition, African Americans — whose unemployment rate hit 7 percent in September — and recent college graduates are disproportionately feeling the pain of a low-opportunity job market.
“It all adds up to an economy that’s resilient on paper but doesn’t resonate with most Americans because of both the loss of purchasing power and the lack of healthy churn,” said Diane Swonk, chief economist at the consulting firm KPMG.
Another growing dark spot is slowing wage growth. Average hourly earnings grew to $37.81 an hour in September, an increase of 3 percent on an annual basis, the most recent data shows — well below inflation at 3.4 percent. Price increases have outpaced wage growth for the past six months.
“What I’m really concerned with is … the ability of the middle class to sustain its current standard of living heading into the election,” said Joe Brusuelas, chief economist at tax consulting firm RSM.
Major stock indexes traded higher Friday morning, as investors bet that the tepid jobs data raises the odds that the Federal Reserve will not raise interest rates when it meets later this month.
But the disappointing report could spell trouble for Republican candidates, who face an electorate frustrated by the rising cost of living in the Trump administration and, polls show, who view the state of the economy as the top issue a month before they go to vote.
President Donald Trump has been touting the economy, telling reporters this week that it’s “the greatest economy in the history of our country by far.” On Friday, the White House responded to the jobs report by emphasizing the creation of private sector jobs and the shrinking of the “federal bureaucracy.”
“Wages are up over the past year, core inflation is down, and everyday Americans are reaping the rewards of the strong Trump economy,” spokeswoman Taylor Rogers posted on X.
But Republicans are facing rising skepticism.
Voters unhappy with the economy two years ago chose Trump in part for his pledge to bring consumer prices down. But polls show that most people have yet to see improvement, making affordability “the dominant issue for most Americans this cycle,” said Erika Franklin Fowler, a professor at Wesleyan University and director of the Wesleyan Media Project.
Many Democrats are selling their party as better able to improve affordability. On Friday, they said the jobs report offered further evidence of failed GOP policies.
“President Trump’s failing economic agenda is weakening the labor market,” Sen. Elizabeth Warren (D-Massachusetts) said in a statement.
A few sectors showed strength in the latest jobs report. Chief among them was health care, which added 17,000 new positions. Growth in the sector is largely immune to market forces, amid rising demand from aging baby boomers, but Medicaid cuts and immigration restrictions are hurting employers’ ability to fill jobs. Construction added 11,000 positions, due to high demand for tradespeople to build data centers.
Manufacturing, a focus for the Trump administration, created 9,000 jobs. The industry has grown by 72,000 positions since hitting a recent low in December.
Most other industries barely expanded or lost jobs. The public sector shed jobs, mostly in local government, while federal government payrolls have stabilized after massive cuts last year.
White-collar sectors, including the financial services and information industries, shrank. Advancements in artificial intelligence have put a damper on entry-level hiring, creating a dearth of opportunities for recent college graduates.
For now, consumer spending remains strong, but economists say sticker shock will eventually force people to pull back. Plus, weak wage growth is expected to continue this year, adding to pocketbook strain.
Nicole Bachaud, labor economist at the jobs site ZipRecruiter, predicted continued soft wage growth as a weaker job market limits workers’ ability to demand higher pay.
“Stability remains the leading strategy for workers who have a position already,” Bachaud said. “And so we’re not seeing a lot of pressure from employers to raise wages. There are going to be more affordability concerns, especially for lower- and middle-income households.”
The Federal Reserve’s decision to raise interest rates in September to fight high inflation is also expected to further cool the labor market this fall and winter. And any additional interest rate hikes would drag down labor market growth in 2027.
“Monetary policy works with a lag,” Swonk said in an economist’s note this week. “The path from here to price stability is littered with potholes; hiring is a key area to watch as we move into 2027.”
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