US job growth came in stronger than expected in September after a delay caused by the government shutdown, but revisions and a rise in the unemployment rate pointed to a labor market that is gradually losing steam.
Nonfarm payrolls increased by 119,000 last month, more than double economists’ expectations for a 51,000 gain.
But the Labor Department also revised down job growth for the prior two months by a net 33,000. The unemployment rate rose to 4.4%, versus forecasts for 4.3%, marking the highest level since October 2021.
Wage pressures eased. Average hourly earnings rose 0.2% on the month, slightly below expectations, and 3.8% from a year earlier. In a separate report, initial claims for state unemployment benefits fell to 220,000 for the week ended November 15, below the 227,000 expected.
Gina Bolvin, president of Bolvin Wealth Management Group, said the data underscored a slowing labor market at a moment when investor attention is being pulled toward strong corporate performance in technology.
“Today’s delayed jobs report showed a labor market losing momentum—just as Nvidia’s breakout earnings reminded investors where the strength still lies,” she said. “The Fed now has more justification to shift toward easing, but today’s market reaction wasn’t just about interest rates. It was about confidence in companies that are executing, even in a mixed economic backdrop.”
Bolvin added: “For investors, this is a pivotal moment to balance caution with opportunity… The message is clear: follow the fundamentals, not the headlines.”
While investor confidence seems driven by strong corporate earnings, some experts caution that underlying labor market weaknesses could still pose challenges for wages and inflation. Eric Teal, chief investment officer at Comerica Wealth Management, said the underlying softness remains notable despite the positive headline surprise.
“Still seeing softness in the labor market despite the upside surprise. We are monitoring the impact related of immigration policies to those industries like construction and leisure and states like Texas that are most exposed,” he said. “These dynamics are likely to pressure wages and keep inflation higher than target.”
Chris Zaccarelli, chief investment officer at Northlight Asset Management, said the combination of the labor data and Nvidia’s blockbuster earnings directly addressed recent market worries.
“The one-two punch of a stellar Nvidia earnings report last night and a better-than-expected September jobs report this morning should give the market a boost, given that it directly addresses the two biggest concerns of the bears: an AI bubble and a moribund economy,” he said.
But he cautioned that the fundamental debate over valuations, AI investment and economic momentum will persist. “While this information will likely embolden the bulls… it probably won’t discourage the naysayers given that Nvidia’s success doesn’t mean that valuations are appropriate across the board.”
While investors may take comfort from Nvidia’s earnings and the jobs report, Wells Fargo economists note that underlying economic trends still complicate the Fed’s policy decisions. The rise in unemployment to 4.44% “was the highest unemployment rate reading since October 2021 and points to the FOMC struggling to maintain the ‘maximum employment’ part of its mandate,” the bank wrote.
While Wells Fargo said the Fed should cut rates by 25 basis points in December, it cautioned that hawkish policymakers may cite “still above-target inflation, a somewhat stronger pace of job growth and buoyant asset valuations” as reasons to hold steady.
“For now,” they said, “we are sticking with our call for a 25 bps rate cut in December, although we acknowledge it is a close call, and a hold would not surprise us at this point.”