In recent months, a steady rise in the U.S. unemployment rate and cooling job growth have brought labor market concerns to the forefront. As inflation continues to ease moderately, the Federal Reserve shifted its focus to the labor side of its dual mandate, cutting rates by a larger-than-usual amount in its September meeting to prevent further cooling.Â
The latest data shows that job growth in the U.S. remains slow, but unemployment has not significantly risen. While some market participants are betting that the Fed will continue to ease aggressively with a large rate cut at the November meeting to support the labor market, most bets have shifted towards a more modest quarter-point cut.Â
Fed Chair Jerome Powell, in a speech on Tuesday, described the labor market as solid and indicated that rate cuts would be implemented over time. These remarks have provided momentum to expectations for a quarter-point cut, but signals from the U.S. remain mixed. Markets are eagerly awaiting tomorrow’s labor market data for further clues.Â
Â
Labor Market Shows Mixed SignalsÂ
The Job Openings data released on Tuesday reached a three-month high in August, exceeding expectations. While the report showed that layoff rates remained almost unchanged, hiring rates were at their lowest since 2013, excluding the pandemic period. Another report related to the manufacturing sector revealed that the share of respondents reporting an increase in employment dropped to the smallest percentage since May 2020.Â
On the other hand, the unofficial private sector payroll report released yesterday showed that growth accelerated after five months of slowdown. The report, published by ADP Research Institute, indicated a payroll increase of 143K in September, following a previous 103K. This marks a rise above the median forecast of 125K in a Bloomberg survey of economists. However, the three-month average increase dropped to 119K, one of the lowest levels since 2020.Â
Â
The ADP report also revealed that the leisure, hospitality, and construction sectors led job growth in the past month, while the information sector was the only one to report layoffs. The manufacturing sector, meanwhile, added jobs for the first time since April.Â
Additionally, wage growth slowed in September. The increase for job changers declined from 7.3% in August to 6.6%, marking the slowest growth since April 2021. For those remaining in their current positions, wage growth slightly eased to 4.7%.Â
The ADP report, released just days before the official data, suggests that the U.S. labor market continues to show strength and supports expectations of a recovery in the official figures.Â
Â
Payroll Growth Expected to Rebound as Unemployment Holds SteadyÂ
The government data, which will be released on Friday, is expected to show a rebound in payroll growth for September and a steady unemployment rate. Â
Economists surveyed by Bloomberg have a median forecast of a 144K increase in payrolls, following the previous 142K, with estimates ranging from 75K to 180K. Economists also expect the unemployment rate to remain at 4.2%, while the annual growth in average hourly earnings is projected to slow from 3.8% to 3.3%.Â

Current data indicates a gradual cooling in the labor market rather than a deterioration. Therefore, if the report signals resilient labor demand in line with expectations, a quarter-point rate cut may become the baseline scenario for next month. Â
On the other hand, an upward surprise in the unemployment rate could strengthen the belief that the Fed will not allow further cooling, potentially reigniting bets on a half-point rate cut.Â