In a report on jobs that was delayed by long U.S. federal government shutdown and the labor market provided mixed signals for September 20, 2025. The economy created 119,000 new jobs which was significantly higher than estimates by economists of around 50k. However, despite the robust job growth and rising unemployment, the rate of unemployment climbed higher, rising to 4.4 4.4% which is up from 4.3 percent in August. Axios+4Business Insider+4Reuters+4
A stronger-than-expected print
The surprising employment report marks a significant rise in the midst of recent slow hiring. Based on the Bureau of Labor Statistics (BLS) the number of jobs added in September substantially outstripped the initial estimate and the tiniest increase of only 22,000 jobs in August (which was later reduced to a loss of 4,500 jobs). 2Financial Times+2 Reuters This report highlights that, even in the midst of uncertainty in the economy including the high cost of borrowing, the an oversupply of labour and a government shutdownthe process of creating jobs is continuing.
The reason unemployment increased
The increase in the unemployment rate, despite gains in employment might seem odd however, labour market dynamics can explain the divergence. The unemployment measure is derived from a separate survey of households that showed growth in labor population or more people looking for work, thus increasing the number of jobs even though payroll jobs increased. Axios+1 In addition the changes to previous months indicate a less favorable backdrop than was previously believed: in the past year, BLS estimated that about 911,000 less job openings had been created compared to the earlier estimates suggested. The Guardian+1
Implications for markets and policy
In the case of the Federal Reserve, the mixed report’s content presents an issue. On one hand job growth over expectations improves the case for short-term rate cuts. On the other hand, the rise in unemployment as well as downward revisions suggest continuing softening in the labour market. According to Reuters reported, “hiring accelerated in September, but the economy shed jobs in the prior month … suggesting labour-market conditions remained sluggish.” Reuters With the Fed meeting looming the end of December, these employment report will have a significant impact on the Fed’s decision-making process.
From a purely market perspective the report caused a bit of volatility. Treasury yields were a bit higher, and those of the U.S. dollar briefly pulled back after investors absorbed the details: a vibrant employment market but also a crack in the momentum. Financial Times+1 For wage inflation observers, the average hourly wage increased by 0.2 percent in September to $36.67 per hour, which suggests moderate pressures on wages rather than the rapid increase. Morningstar
Sector and context of trend
The wider context indicates that hiring is still uneven and less rapid than prior cycles. Economists believe that an U.S. economy now may only require up to 50,000 or 30,000 jobs each month to keep pace with the population growth that is considerably lower than the 150,000-plus benchmark that was the norm in earlier times. Reuters A few analysts cite factors like decreased immigration, technological disruption, and changes in the demand for labour as a reason for the difficulties employers are facing. Reuters
What should you be watching for in the future?
Future data gaps The BLS has canceled the October employment report due to the shut down. The October unemployment and hiring numbers will be combined with the November data and released mid-December, creating uncertainty in the near-term situation. AP News+1
Pay and participation trends Monitoring of participation in the labour market long-term unemployment, wage growth will be crucial in the assessment of the health of the labour market.
Effect upon Fed policy The decision of whether the Fed decides to make another rate cut or maintains its policy depends on whether future labour data show a rise or further gradual softening.
Conclusion
The September jobs report reveals the complexities of U.S. labour market in the latter half of 2025. Job creation increased more than forecast and the fundamentals remain shaky. The rising rate of unemployment and downward revisions of data indicate that the market isn’t collapsing or exploding but is that is at an intersection. For market players and policymakers alike this is a message of caution The labour market is still in operation however its rapid rise might have stalled.
