US labour market monitor: Calm before the storm?

The long-awaited September Jobs Report was released with mixed signals, as nonfarm payrolls growth recovered to +119k (August -4k) but the unemployment rate still rose to 4.4% (from 4.3%). The uptick was driven by an increase in native-born labour supply (+636k), rather than weak demand (chart 1). We do not expect labour supply to continue growing and hence do not see this as a dovish signal for the Fed. This was the final Jobs Report before the Fed's next meeting on 10 December, as the BLS's updated schedule indicates that October NFP will be released alongside the November Jobs Report on 16 December. The next JOLTs report for October will be released on 9 December.  

Alternative private-sector data signals a continuation of the 'low firing, low hiring' environment. ADP's National Employment Report revealed that private businesses added 42k jobs in October, exceeding the forecast of 28k. However, ADP's weekly NER ('Pulse') showed, that during the four weeks ending in week 44, private employers shed an average of 2.5k jobs per week. While the monthly report highlights overall job gains, the weekly data suggests negative momentum towards late October. The cautious hiring environment is further complicated by seasonal factors. October's Challenger report revealed a delay in seasonal holiday hiring announcements moving from September to October. This unusual timing may impact s.a. NFP data, as seasonal job gains traditionally peak in October-November. The delay could thus weaken October's NFP data while boosting figures in the following months, as we wrote in RtM USD, 11 November.

While hiring has slowed, the Challenger Report also showed a sharp rise in layoff announcements, which climbed to 153k in October from 54k in September. Of these, 33k tech sector layoffs were tied to AI-driven productivity gains, with the rest driven by weaker demand and rising costs. AI-related investments are driving private investment growth, with USD146.8bn spent on technology. However, other fixed investments have contracted by USD26.6bn. As such, the seemingly large-scale investments have not led to a boost in job creation. This dynamic raises concerns about the broader economic impact of AI-related productivity gains, particularly in a labour market already under pressure.

Recent consumer sentiment data highlights disparities between income groups. The Univ. of Michigan's consumer sentiment index fell to 50.3 in November, its lowest level since June 2022. At the same time, the 3M average shows faster recovery among the top tercile households compared to the bottom tercile (Chart 2). The Conference Board's sentiment index confirms this, as confidence declined among those earning less than USD75k a year and improved for higher-income groups earning over USD200k.

In contrast, sentiment across income terciles converged during the pandemic years and post-Liberation Day tariffs. In fact, the Atlanta Fed's wage growth tracker indicates that wage growth for the bottom quartile outpaced the top quartile on a 12-month moving average until October 2024, when it reversed . These factors suggest income distribution may have been less skewed initially than widely assumed. Along with a balanced labour market, this supports our view that consumption growth can remain healthy also outside the highest-income households