Still Low Hiring, Low Firing: What the September Jobs Report Reveals

 



The summer rebound now appears more modest than it did a month earlier, while hiring and quits have yet to show meaningful movement.

At the beginning of the fall, I identified two important tests for the labour market. The preliminary benchmark revision on August 28 would help determine how much confidence to place in historical payroll figures. The August jobs report, scheduled for September 4, would indicate whether July’s weakness marked a turning point or merely a pause. I argued that another weak month would make the hiring freeze look less like a period of stability and more like a warning sign. Both tests have now taken place, and the September jobs report, released October 2, provides a third piece of evidence. Taken together, the results do not point toward a recovery.

How Much of the Positive News Remained

The August report initially suggested that the labor market might be turning a corner. Early estimates showed an increase of 162,000 payroll jobs, the strongest monthly performance since March. July was also revised from a reported loss of 23,000 jobs to a gain of 21,000. However, the September report reversed much of that improvement. August's estimate fell to 133,000, while July returned to a loss of 10,000. Combined, the two months now account for 60,000 fewer jobs than previously reported. September added only 29,000 jobs, below the previous twelve-month average of 45,000 per month.

Monthly change in nonfarm payrolls, 2026. Source: U.S. Bureau of Labor Statistics via FRED.

The latest figures also show renewed weakness in underemployment. During August, the number of people working part-time while seeking full-time employment declined by 414,000, bringing the total to 4.4 million. That improvement did not last. In September, the number increased again to approximately 4.5 million.

The benchmark revision offered a more encouraging result. BLS currently expects to reduce its March 2026 payroll count by 79,000 jobs, representing an adjustment of just 0.1 percent. The private-sector revision is larger, with an expected reduction of 178,000. This is considerably smaller than last year's preliminary revision, which removed 911,000 jobs. For this year, the monthly employment survey and the more comprehensive count based on unemployment insurance records are largely consistent.

Three Reasons I Still See No Meaningful Thaw

The first concern is the composition of employment growth. Even after the revisions, two sectors accounted for most of August's gains. Food services and drinking places added approximately 34,000 jobs, while local government education contributed about 49,000. Together, they represented more than 80,000 of the month's 133,000 new jobs. Much of the education increase offset losses recorded in July. Summer contract expirations, combined with school districts underestimating enrollment and staffing needs, contributed to the earlier decline. August largely corrected that situation, leaving little net employment change across the two months. The restaurant increase appears connected to a late-summer rise in consumer spending. Meanwhile, health care, a major source of employment growth over the previous year, added only 17,000 jobs in September, approximately half its twelve-month average of 33,000.

The second concern is worker turnover. According to the BLS turnover survey released September 29, employers made 5.2 million hires in August, compared with 5.1 million in July. The hiring rate increased slightly, rising one-tenth of a percentage point to 3.3 percent. That figure remains only marginally higher than the 2010 average, when unemployment averaged 9.6 percent. The quits rate stayed at 1.9 percent for the second consecutive month. Excluding the spring of 2020, it has not been this low since 2014. Job openings also declined to approximately 7.1 million. Employers continue posting vacancies but fill relatively few positions, while employees remain reluctant to leave their jobs. When payroll employment increases without a comparable improvement in hiring, the headline figures and the underlying labor market activity present different pictures.

Hires and quits rates, total nonfarm, through August 2026. Source: U.S. Bureau of Labor Statistics via FRED.

The third concern involves unemployment duration. The percentage of unemployed individuals searching for work for at least 27 weeks increased from 25.5 percent in July to 27.0 percent in August. It then edged higher to 27.1 percent in September, representing approximately 1.9 million people. Apart from earlier this year, the share has not reached this level since the period following the pandemic. The consequences of a sluggish labor market are not distributed equally. People who have already lost their jobs face longer searches, while new entrants to the workforce encounter fewer available opportunities.

Low Hiring, Low Firing

In July, I highlighted an increase in announced layoffs, including WARN notices and Challenger figures, and questioned whether those announcements would eventually translate into actual job separations. So far, the separation data suggest they have not. August recorded approximately 1.6 million layoffs and discharges, equivalent to 1.0 percent of employment and broadly consistent with July.

That is encouraging news, but it also makes the underlying situation clearer. Employers are retaining existing employees while remaining cautious about bringing in new workers. Throughout the summer, low levels of job losses helped keep unemployment relatively contained, even as hiring remained weak. September's unemployment rate increased to 4.2 percent, alongside a rise in labor force participation to 61.8 percent, returning to April's level. More people are now actively seeking employment. When hiring remains limited, a larger pool of job seekers can lead to longer periods of unemployment.

Wage developments reinforce this interpretation. Average hourly earnings for private-sector employees reached $37.81 in September, increasing by just 5 cents from the previous month. Over the past twelve months, wages have risen 3.0 percent, slightly below August's annual pace. Workers generally have greater bargaining power when they can realistically leave for better-paying opportunities. With quits remaining so low, that leverage is limited.

What I Will Be Watching Next

The September report weakened the payroll picture, but payroll employment was never the first indicator I intended to prioritize. My main focus remains the hiring rate. The September Job Openings and Labor Turnover Survey, scheduled for November 3, should help establish whether August's modest one-tenth-point increase represents the beginning of a broader improvement. The October jobs report is scheduled for November 6. If hiring rises for a second consecutive month and quits also begin to increase, I would be more confident describing the change as a genuine thaw. Until then, ongoing uncertainty and higher rates could add further pressure to an already strained labor market. More visible activity should not be confused with genuine improvement in labor market movement.

Dr. Adriana Kugler is a professor of public policy and economics at Georgetown's McCourt School. A labor economist, she served on the Board of Governors of the Federal Reserve System between 2023 and 2025. An earlier version of this analysis was published in her newsletter, Kugler Labor Notes and Beyond.

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