US jobs report expected to show growth, but is change ahead?

Bloomberg economists predict a sharp hiring slowdown.

A monthly US jobs report due Friday may be the last to show solid hiring before a sharp slowdown, according to Bloomberg Economics.

The report will probably show employers added 173,000 workers to payrolls in September, though figures due a month from now could show hiring plummeted to 100,000 in October, Bloomberg economists Anna Wong, Stuart Paul and Eliza Winger wrote Thursday in a preview of the release.

“The September payrolls report is backward looking. Since the September survey week, financial conditions have tightened sharply and auto strikes have escalated,” Wong, Paul and Winger said.

“Rather than layoffs, a slowdown in hiring usually precedes a higher unemployment rate. That dynamic is about to pick up.”

The September numbers are set to add another data point to the array of sources sending increasingly mixed signals on the state of the US labor market.

Weekly initial filings for unemployment insurance have returned to near the lowest levels of the expansion so far after an uptick earlier in the year, and the latest numbers from Challenger, Gray & Christmas suggest companies are scaling back downsizing plans amid a ramp-up in holiday hiring plans.

But a monthly report on private-sector employment from ADP Research Institute revealed the slowest pace of payroll growth in September since the beginning of 2021.

Two big storylines from August will continue to play out in the September jobs report, according to the Bloomberg economists.

A resolution of the Hollywood writers strike will boost payrolls after subtracting from them last month, and fallout from the bankruptcy of trucking company Yellow Corp. in August may have rippled through other industries in September, they said.

Wong, Paul and Winger also expect the labor force participation rate to remain unchanged at 62.8%, the unemployment rate to tick down to 3.7%, and average hourly earnings to post another 0.2% increase.

Their predictions for the September report are largely in line with median estimates in a Bloomberg survey of outside forecasters.