PIMCO Commentary: U.S. Employment Report
21 NOV, 2025
By Tiffany Wilding from PIMCO
By Tiffany Wilding, PIMCO Economist
What happened:
The U.S. Bureau of Labor Statistics released its September employment report, which showed a rebound in payroll growth (+119,000) along with other more mixed data. The unemployment rate rose to 4.44%, 12 basis points higher than in August, driven by an increase in the participation rate. The household survey also appears to have been affected by seasonal adjustments failing to fully capture temporary summer work patterns, especially among teenagers. However, beneath all that noise, the 7-basis-point increase in the share of people who have lost their permanent job relative to the labor force was more concerning.
What does it mean?
Overall, this report is consistent with various private-sector indicators suggesting that the labor market continued to lose momentum in the third quarter, after slowing sharply in the first half of the year. Aggregate hours worked have stagnated over the past six months, while real labor income has fallen below 1% on an annualized basis. Looking ahead, we continue to expect October and November reports to show a slowdown in payroll growth as a result of more limited seasonal hiring in retail sectors, a reduction of 150,000 government jobs due to employees who accepted the “fork in the road” severance package earlier this year, and the loss of work permits related to the cancellation of the Temporary Protected Status (TPS) program. Supreme Court rulings allowing the revocation of TPS for many immigrant workers from Venezuela eliminated about 168,000 work permits in October and another 125,000 in November. We still expect the unemployment rate to continue rising through the end of the year before stabilizing, as tax cuts provide greater economic support in the first half of 2025.
Next steps:
Following this report and the unexpected rise in the unemployment rate, we believe the Federal Reserve could go either way in December. If the Fed does not cut rates next month, we think there is still a strong chance it will do so in January.
