The Job Market: Healthier Than You Think

The U.S. labor market remains healthy enough for the Federal Reserve to keep prioritizing inflation control despite September’s weak payroll report.

• The economy added only 29,000 jobs in September, versus an expected 90,000, while payroll growth for July and August was revised lower.
• Horizon’s calculation shows average employment growth of 66,000 over the six months through September, stronger than the comparable average through much of the previous year.
• The unemployment rate rose only slightly to 4.2% in September, still close to its modern-era low, while labor-force participation increased.
• August real personal consumption spending exceeded expectations, revised second-quarter GDP growth reached 2.2%, and GDPNow indicated third-quarter growth above 3%.
• The 10-year Treasury yield rose despite the weak jobs report, suggesting markets may be more focused on a higher long-term rate path than on the timing of the next Fed hike.

Takeaway: Horizon expects the economy’s core growth foundations to remain solid through the end of 2026, allowing the Fed to pursue lower inflation; slower hiring could reduce demand without materially damaging corporate earnings, but the October rate decision remains uncertain.