Why the Employment Mystery?

 Popular Economics Weekly

“Both nonfarm payroll employment (+29,000) and the unemployment rate (4.2 percent) changed little in September, the U.S. Bureau of Labor Statistics reported today. Employment in all major industries changed little over the month.” BLS.gov

FREDpayrolls

September’s U.S. official unemployment report was a disappointment—just 29,000 jobs were added vs. +133,000 jobs in August. But that may not be a sign of a weakening labor market.

It should be obvious that the labor market is at the beginning of another recovery with the massive acceleration in government and A.I. spending that eclipses any prior era by $Billions.

The new chip factories and data centers are being built over time. It may be another decade before we will see definitive results in job formation and GDP growth, as happened in prior technological revolutions, such as for computer and the Internet use to spread.

So it’s difficult to see the changes, contrary to the Bureau of Labor Statistics report, or even the final employment numbers. For instance, after losing -10,000 jobs in July, mainly because of supply disruptions from Trump’s Iran blockade, payroll formation was originally reported to be 162,000 jobs in August then reduced to 133,000 hires in its latest revision.

And I’m guessing that September new jobs will probably be revised upward from 29,000 jobs, given that it’s hard to estimate September because totals include seasonal back to school and government hires that aren’t known immediately.

So, all that investment must eventually grow the job market as well. Steve Ratner, Morning Joe’s resident economist, said in a NYTimes opinion piece that we could already be seeing its impact; the labor markets are beginning to hire more technical professionals because of it.

“To date, A.I. has killed a number of jobs but boosted employment for plumbers, electricians, data scientists and market research analysts”.

Manufacturing may be the biggest story. Manufacturing employment was little changed in September (+9,000) but is up by 72,000 since a recent low in December 2025.

And the Institute of Supply Management’s manufacturing index of new orders climbed 1.6 points last month to a robust 55.3%. It means a majority (55.3%) of supply managers report more new orders. Some manufacturers are even hiring for the first time in a few years. Job creation was positive for the third straight month, following a 33-month streak of declines.

So the low September payroll total may be a temporary glitch.

And GDP growth has already been revised upward in the past two quarters. Q1 2026 GDP was bumped up from 2.0 to 2.2 percent and Q2 from 1.5 to 2.5 percent. And there are +3 percent predictions for Q3 growth.

But all that activity is blowing up inflation. The price index for gross domestic purchases increased 5.6 percent in the second quarter GDP number, revised down 0.2 percentage point from the previous estimate.

This means there will be another Fed rate hike, but maybe after the November election, which is the tradition so as not to be seen as influencing voters.

“Total nonfarm payroll employment changed little in September (+29,000), following an average monthly gain of 45,000 over the prior 12 months.

Health care employment continued its upward trend in September (+17,000), but at a slower pace than the average monthly gain over the prior 12 months (+33,000).

Will the employment picture improve with literally $Trillions going into the economy? More importantly, will it improve consumers’ confidence in their own future, which has been in the dumps? They have to believe it will for that to happen. A.I. robots won’t do it.

That is the conundrum, as former Fed Chair Greenspan would say.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

A 'Hard Landing'?--Part II

 Popular Economics

“The number of job openings was little changed at 7.1 million in August, the U.S. Bureau of Labor Statistics reported today. Hires changed little at 5.2 million, while total separations were unchanged at 5.1 million. Within separations, quits (3.1 million) were unchanged, while layoffs and discharges (1.6 million) were essentially unchanged.” BLS.gov

FREDjolts

Will the federal Reserve engineer a hard or soft landing in this new rate hike cycle just beginning? A soft-landing is possible, but something has to be done about the rapid rise in interest rates.

The last time the Fed acted to tame inflation was during the post-COVID-19 pandemic recovery when CPI inflation had reached 9 percent.

But it worked. There wasn’t another recession and the economy has had five years of continuous growth since then, in large part because of the bipartisan recovery aid, including personal checks paid to almost all Americans.

More than $5Billion was invested in the recovery from the worst recession since the Great Depression.

Can the Fed do a repeat performance under new Fed Chair Kevin Warsh, an actual economist?

The just released JOLTS report shows that better economic growth is ahead, even with the Fed’s first rate hike since 2024. The actual unemployment report is due and will give more clues—such as whether hiring picks up.

So the hard landing scenario—which is an engineered recession when the Fed holds interest rates too high for too long--I believe is less likely, even though bond interest rates are the highest in 20 years; a danger single that credit conditions are tight for both businesses and consumers.

The Jobs Openings and Labor Turnover survey shows the number of job openings has been gradually increasing from its low of 6.55 million openings last December and is now 7.1 million.

There were 5.2 million hires and 5.1 million separations (i.e., quits), thus approximately 100,000 net new jobs were possibly created in August. This should be positive news for the upcoming August unemployment report.

If higher job formation continues, consumers will spend more despite the Fed’s actions to raise their higher borrowing costs. Consumers aren’t feeling good about the cost of anything since the Iran war.

They will need a confidence boost. They aren’t very happy per the latest Conference Board survey.

“The Consumer Confidence Index deteriorated notably in September, following two prior months of softening,” said Dana M Peterson, Chief Economist, The Conference Board. “The Present Situation Index fell sharply, while the Expectations Index slipped further into negative territory.”

But higher job creation numbers might do the trick and allow a soft landing, especially if the A.I. build out will create the good jobs that are needed to run the new economy.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Will It Be a 'Hard Landing'?

Popular Economics

“The US LEI receded slightly in August, the first monthly decline since March of this year,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “Four out of ten components fell compared to the previous month, with consumer expectations remaining a significant strain on the Index.”

 

LEI

Does the new Fed chairman want to be another Paul Volcker, whose Board of Governors raised the Fed Funds rate to 20 percent to cure the stagflation surge of the 1970s? We don’t need another ‘hard landing’, the economic term for an engineered recession.

New Fed Chair Kevin Warsh said at the most recent FOMC meeting that the Fed would do what it takes to restore confidence in the Federal Reserve to fulfill its mandate of low inflation with maximum employment.

And to make its point the 12 Fed Governors voted unanimously to raise their Fed Funds rate +0.25 percent, thus raising the Prime Rate from 6.75 to 7.00 percent that governs most installment loan and credit card rates.

So the surge in August retail sales might not be a good thing, as much as consumers would like to celebrate another good holiday, since how is the Fed to bring down inflation otherwise when consumers are a major cause of it?

The core personal consumption expenditure index—the version of the Fed’s preferred inflation measure for consumers that excludes food and energy prices—has exceeded the Fed’s 2% target for over 60 months.

The Conference Board’s Index of Economic Indicators (LEI) that attempts to predict future growth has been flashing signals of a slowdown for months per its graph above (downward slope of blue line).

But even the tariffs and Mideast wars haven’t slowed down consumer spending enough. The Fed is saying that it has waited too long to act to bring down inflation, which is endangering economic growth and the U.S. currency.

Chairman Warsh also said five years was too long to wait for the inflation rate to return its 2 percent target rate because of the tariffs and Middle East unrest. It was last this low during the COVID-19 pandemic.

Of course, “The odds of a serious Fed policy mistake are uncomfortably high and rising,” warned Mark Zandi, chief economist at Moody’s Analytics, in a post on X, I quoted last week.

Barron’s Randall Forsythe cites David Rosenberg of Rosenberg Research on what can be the most dangerous mistake, “Unless oil prices come down quickly. The only way by which interest rates bring inflation back to the 2% target is “by destroying enough demand to offset the supply loss. That is a recession by design,” he concludes.

Economists call it a ‘hard landing’. And that has always been the dilemma; how can the Fed boost interest rates just enough to engineer a ‘soft landing’, which means bring inflation back down to its long-term average without causing a recession?

This is the rock and a hard place I’ve been talking about. It can’t be done without real pain.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen