US job growth slowed more than expected in September and the nonfarm payrolls count for the prior two months was revised sharply lower, almost taking another interest rate hike from the Federal Reserve this month off the table.
US nonfarm payrolls increased by +29k in Sep-26, slowing sharply from a downwardly revised +133k in Aug-26 and falling well below market expectations of +90k. Meanwhile, the unemployment rate edged up to 4.2% (Aug-26: 4.1%) as more workers entered the labour force. In addition, payroll gains for Jul-26 and Aug-26 were revised lower by a combined 60k jobs, indicating softer employment growth than previously estimated.
Despite the weaker headline print, underlying labour market conditions remained relatively stable. Initial jobless claims have continued to hover near multi-decade lows, partly attributed part of the payroll weakness to seasonal adjustment distortions associated with the late Labour Day holiday. The report also highlighted continued moderation in wage pressures and a labour market characterised by slower hiring activity but limited layoffs.
MBSB said the latest data indicates that hiring momentum has softened entering 4Q26, as reflected in slower payroll growth and easing wage pressures. Nevertheless, the overall labour market remains relatively resilient, with no clear evidence of a significant deterioration in employment conditions.
Going forward, this gradual moderation in labour market conditions may provide some support to the disinflation process. However, the policy outlook is likely to remain dependent on incoming economic data, particularly inflation developments.
