No September jobs report, no problem. Here's what we know about the labor market - and it's not great.

By Jeffry Bartash

Hiring has slowed to a crawl, and there's no sign it will pick up soon

The Antietam National Battlefield Visitors Center in Sharpsburg, Md. Monuments, trails and other outdoor exhibits are accessible to visitors, but many buildings were locked and National Park Service employees were told to stay home during the federal government shutdown.

Welcome to jobs Friday - except there's no U.S. employment report today. Blame the latest government shutdown in Washington.

That's not to say Wall Street and the Federal Reserve are flying blind. They're not. The September employment report was unlikely to bring good news, based on a variety of other public and private surveys of the jobs market.

The U.S. economy was forecast to show a paltry 51,000 increase in new jobs before the employment report was postponed. The unemployment rate was expected to hover at the current level of 4.3%.

Wall Street DJIA SPX forecasts aside, here's what we know for sure:

Businesses are no longer hiring aggressively. Job creation has slowed sharply since the spring and employment even fell in June for the first time in 41/2 years - largely due to the Trump administration's trade wars.

In short, it's not a good time to look for a job.

"The chill in the labor market is unlikely to thaw for workers anytime soon, and you don't necessarily need the survey data to tell you that," said Elizabeth Renter, senior economist at NerdWallet.

Businesses are still hesitant to hire because of frequent changes in tariffs that have raised costs, reduced customer demand and cast a cloud of uncertainty over the economy. Hence, Wall Street's lowball estimate for job creation in September.

Read: 'We believe we are in a stagflation period': U.S. manufacturers stuck in slump that shows no sign of ending

But would it have really been a poor number? Not entirely, but for the most part, yes. Let us explain.

From fast to slow

The U.S. has been a job-producing juggernaut for years. Take the decade before the pandemic. The economy created an average of 182,000 jobs a month to drive the unemployment rate down to a half-century low of 3.5% in 2019.

As recently as 2023, the U.S. created an average of 216,000 jobs a month. Heady stuff.

By those standards, a 51,000 increase in September would be pretty poor. Most businesses simply aren't hiring.

Consider this: Of an estimated 600,000 new jobs created from January to August, the healthcare industry accounted for 86% of them. The rest of the jobs created were scattered among retailers, restaurants and hotels.

A deflating labor market is the chief reason why the Fed cut interest rates last month for the first time this year.

Such low hiring should lead to rapidly rising unemployment since fewer people looking for work would be able to find jobs. But it isn't.

Yes, the unemployment rate has been rising - to 4.3% from a 54-year low of 3.4% in the spring of 2023.

Yet even with such sluggish hiring, the unemployment rate was forecast to stay at 4.3% in September, a remarkably low level despite the labor market enduring its most stressful period since the pandemic five years ago.

Low hiring, low firing

It's what economists have taken to calling the "low hire, low fire" labor market.

To some senior officials at the Federal Reserve, it's a sign of stability. To others, it is anything but - the labor market could quickly unravel and unemployment could skyrocket if the Fed is too slow to cut interest rates.

Whatever the case, all we know for sure is that most businesses are shunning layoffs. For now.

Workers have been harder to hire since the pandemic and more costly to train, economists point out. It doesn't make sense to lay them off now and to try to hire them when the economy improves. They may end up finding work elsewhere.

The Trump administration's crackdown on immigration has also become another factor in business hiring and employee retention plans.

In the first eight months of this year, some 1.2 million people dropped out of the labor force. That's an unusually large decline when the economy is still expanding.

Higher deportations might explain part of the decline, but several surveys seem to suggest many immigrants have left the country on their own because it was getting harder to work and live in the U.S.

If that's what is really going on, economists say, the U.S. won't be able to continue to add 150,000 to 200,000 jobs a month, as it has done in the past. There won't be enough workers to go around, especially as baby boomers retire and birth rates decline.

A flat or shrinking labor force has big implications for the unemployment rate. The U.S. would not have to create as many jobs in the future to keep the unemployment rate unchanged - what is known as the break-even rate.

The new math suggests the break-even rate might be shockingly low, with most current estimates ranging from 30,000 to 80,000. Fed Chairman Jerome Powell even suggested it could be zero.

We'll have further clues once the government reopens and the September jobs report is made public. It's expected to reaffirm that the labor market has weakened and that a rebound still appears to be far off.

The recent plunge in hiring tells the story. The economy added an average of just 25,000 jobs a month from May to August, marking the worst stretch since 2010, excluding the COVID-19 pandemic era.

The only thing that seems certain is that the U.S. labor market is undergoing a fundamental change, both in the short run and in the long term. And there's no telling how it will all play out.

-Jeffry Bartash

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

10-03-25 1047ET