Jobs Growth Misses Big for Second Straight Month

The U.S. added fewer jobs than forecast for a second consecutive month in September, signaling weakness in the labor-market recovery and complicating a potential decision by the Federal Reserve to begin scaling back monetary support before the end of the year.

Nonfarm payrolls increased 194,000 last month, the smallest advance this year, after an upwardly revised 366,000 gain in August, a Labor Department report showed Friday. The unemployment rate fell to 4.8%, partly reflecting a decline in the size of the labor force. Meantime, average hourly earnings jumped.

The median estimate in a Bloomberg survey of economists was for a 500,000 rise in September payrolls. U.S. stock futures and Treasury yields were little changed after the report.

Consecutive months of sluggish job growth indicate a tug of war between employers — starved for workers to meet demand — and candidates that have been slow to return to the workforce. Nonetheless, school reopenings and the end of expanded federal unemployment benefits should lead to a pickup in hiring in coming months at a time when companies are boosting pay.

The labor force participation rate — a measure of the share of Americans who are employed or looking for work — fell by 0.1 percentage point to 61.6%.

In September, employment decreased by about 144,000 in local government education. The Labor Department said hiring last month was lower than typical, resulting in a decline after seasonal adjustment. Payrolls at restaurants and bars rose only slightly.

The jobs figures risk not satisfying the Fed’s “substantial further progress” criteria for labor market improvement, indicating the central bank could delay its plan to begin tapering asset purchases by year-end.

Chair Jerome Powell said after last month’s policy meeting that “a reasonably good employment report” for September would be needed to meet that test.

Vaccine mandates put into place by employers and governors in states including California and New York in recent weeks could also be contributing to churn in the labor market and adding to hiring challenges. The report also showed employment in nursing and residential care dropped 37,600.

While health concerns about the delta variant likely weighed on hiring in August and September, cases are dropping or poised to start falling in a majority of states, which could bring more Americans back to the labor force in coming months.

Total government employment fell 123,000 in September, the biggest drop in 11 months. Private payrolls climbed a less-than-forecast 317,000 last month, the smallest gain since April.

While payrolls at leisure and hospitality firms improved from August, job growth in the industry has slowed markedly from earlier in the year.

Hiring firmed in construction, while payrolls rebounded in wholesale and retail trade.