Unemployment hits four-year high, but data paints a messy, mixed picture

• Economic policymakers are hugely divided over which way the job market will tip in the face of a slew of economic upheaval from AI, immigration and fast-moving trade policy.

By the numbers: Employment rose by 119,000 in September, the largest payroll gain since April.

• But new revisions show the labor market lost 4,000 jobs in August, flipping from the gain of 22,000 jobs initially estimated. It is the second time in the past four months that employers have shed jobs.

Zoom in: The unemployment rate edged up by 0.1 percentage point to 4.4%, the highest since Oct. 2021.

• Going out another decimal point, the move looks a bit larger: rising from 4.32% to 4.44% in September.

Yes, but: That uptick in joblessness disguises some good news. The rise came as nearly half a million workers entered the workforce, rather than a jump in joblessness.

• In fact, 59.7% of the population was employed in September, up a tick from the prior month.
• The share of prime-age workers — those aged between 25-54 — with a job held steady at 80.7%.

The intrigue: The household survey, used to estimate the unemployment rate, holds more significance in the current economic moment than is usually the case.

• Economists have leaned on private sector data in recent weeks for labor market clues during the shutdown-induced data blackout. But that data falls short when it comes to estimating joblessness and the fluctuations in the size of the labor force.
• In response to a question from Axios in July, Fed chair Jerome Powell said the unemployment rate was "the main number you have to look at now."
• President Trump's immigration crackdown has made it difficult to judge whether slower job gains were more a result of lackluster demand or shrinking supply.

What they're saying: "The headline job gains are encouraging, but the roughly seven-week delay limits its usefulness for assessing current conditions," Cory Stahle, senior economist at Indeed, wrote Thursday morning.

• "Today's [delayed] report is unlikely to shift businesses' or policymakers' outlook much. The pervasive uncertainty that is paralyzing the labor market appears likely to carry forward into 2026," Stahle said.

The mixed-bag jobs report offered ammunition for both factions in the Fed's debate over whether to cut interest rates again at its meeting in three weeks.

• Those whose instincts were to keep cutting can point to the higher unemployment rate as justification. Those who want to stand pat can point to the solid job growth number.

State of play: Wednesday afternoon brought official word that this will be the last jobs report out before the Fed's policy meeting.

• The BLS said Wednesday that there will be no October jobs report, because it was unable to conduct the household survey in October while the government was closed — and it can't backtrack now that the agency is back in business.
• October payrolls data will be incorporated in the November report, but that is being delayed until Dec. 16, the week after the Fed meets.

Of note: Minutes of the last policy meeting, out Wednesday afternoon, add context to the schism within the central bank.

• In particular, there is growing worry among policymakers that cutting interest rates further, while inflation remains elevated and the job market reasonably stable, could undermine the Fed's credibility as an inflation-fighter.
• "Most participants noted," the minutes say, that "further policy rate reductions could add to the risk of higher inflation becoming entrenched or could be misinterpreted as implying a lack of policymaker commitment to the 2 percent inflation objective."
• The CME FedWatch tool now assigns 60% odds that the Fed will leave rates steady, compared to 70% before the minutes and jobs report.

The bottom line: This is setting up to be one of the most contentious Fed meetings in a long time — and the mixed jobs report and data drought aren't helping.