Payroll numbers fuel consumer angst in September

October 2, 2026

Payroll employment disappointed by adding a dismal 29,000 new jobs in September, after a downwardly revised August gain of 133,000. Gains were concentrated in the private sector, while the public sector shed 17,000 jobs, mostly at the local level excluding education. Federal jobs fell by 1,000; that was mostly postal workers retiring. 

Healthcare and social assistance dominated private sector gains with an increase of 23,000 jobs. Leisure and hospitality added 10,000 jobs, all of which were in food services. Accommodation actually shed jobs. An end to the Temporary Protected Status of hundreds of thousands of immigrant workers left openings. The first major cliff occurred for Haitian workers in July; Venezuelan workers lost their TPS status today. 

Construction added 11,000 jobs, concentrated among specialty commercial contractors, an area which is being buoyed by the data center boom.  Manufacturing added 9,000 jobs, supported by machinery, plastics and rubber products. The machinery gains are being driven by data construction and include HVAC equipment, engines, turbines and power transmission. Gains in transportation were smaller and split between vehicles and aircraft manufacturing. Aerospace is back up and running closer to capacity after a series of strikes and safety setbacks in recent years.  

The information sector, which includes tech, publishing, streaming and broadcasting, shed 10,000 jobs. The bulk of those losses occurred in the entertainment sector. Other losses were spread across finance, insurance and professional business services.   

Average hourly earnings edged up a tepid 0.1% for the month and rose 3.0% from a year ago. A surge in benefit costs is cutting into wage gains, along with low turnover rates. Quits dropped again in late August, as reports of job insecurity intensified. We have now seen twelve consecutive months of average hourly earnings falling below the pace of inflation. The is the longest bout since the searing inflation of late 2021 through early 2023. That helps explain why consumers' attitudes have decoupled from aggregate gains.

The outliers for wage gains showed up in information with a sharp 0.9% surge in average hourly earnings even as jobs were shed. That likely reflects a bias toward holding onto more experienced workers.  AI favors workers in computer programing. Wages in leisure and hospitality jumped 0.6%, marking the second month in a row of outsized gains. That reflects pockets of labor shortages due to the loss in TPS workers. Substitutes among native-born workers demand higher wages to fill those openings. 

Healthcare and social assistance wages accelerated 0.3% but remained subdued on a year-over-year basis. That is due to limits on wages due to cuts in Medicaid, which are making it difficult to replace workers lost to the expiration of TPS. 

Hours worked held steady at 34.4, along with overtime, which averaged three hours per week. Weekly earnings edged up just 0.1%, reflecting little change in hours worked.  

Separately, the unemployment rate ticked up to 4.2%, while the participation rate jumped to 61.8%. That is the highest since May; the participation rate has risen 0.4% since July. The gains were concentrated in prime-age workers – 25–54-year-olds – while older workers dropped out of the labor market. Teens continued to show a rise in participation.

The U6, a broader measure of unemployment, edged down to 7.6%, its lowest rate since January 2025. The ranks of the long-term unemployed picked up slightly to 1.94 million, the highest since May. That underscores the frustration of those unemployed more than 27 weeks. 

Quit rates fell again in late August, which underscores the sense of job insecurity that is showing up in consumer attitudes about the economy. Those who have jobs are still clinging on, while those without are left wanting. Quits are close to the levels hit emerging from the 2008-09 Great Recession in sectors most exposed to AI – finance, insurance, professional business services and information. 

The number of multiple job holders rose slightly to nearly nine million, the highest since November 2025. That is another source of unease, as many consumers are struggling to make ends meet amidst an erosion in purchasing power. 

Those out on vacation picked up to the highest September since 2009. That marks a major reversal from the weaker vacation trends we saw earlier in the summer.  Those out for parental leave remained elevated, while those out for other family duties, including eldercare, jumped to the highest level for September ever. 

The household survey showed stronger employment gains in August and September, but those did not materially change the trajectory of employment, which remains weak. A loss in the supply of workers due to a surge in retirements and loss in immigrant labor is holding the overall unemployment rate down. It is an uneasy balance in the labor market.