Hiring Defied Expectations in September, With 119,000 New Jobs

U.S. job growth defied expectations in September, according to a Labor Department report issued nearly seven weeks late due to the government shutdown.

Payrolls rose by a seasonally adjusted 119,000 on the month, the strongest gain since April, the Labor Department said Thursday.

That was well above the gain of 50,000 jobs economists polled by The Wall Street Journal expected to see. The September report covers the month before the recent government shutdown began on Oct. 1.

However August’s payrolls number was revised to a loss of 4,000 jobs, and July’s payrolls were revised slightly lower to a 72,000 gain. That meant employment in July and August combined was 33,000 lower than previously reported.

The unemployment rate, which is based on a separate survey from the jobs figures, rose slightly to 4.4%, reaching the highest level in four years as nearly half a million people joined the labor force. Economists expected the unemployment rate to hold at 4.3%.

Stocks rose sharply Thursday. Investors were already responding enthusiastically prior to the employment report to Nvidia’s strong earnings report late Wednesday, but the jobs figures added fuel to the fire.

Separately, the Labor Department released updated weekly jobless claims that suggest layoffs didn’t rise sharply during the government shutdown, which ended last week. In the week through Nov. 15, 220,000 people newly filed for jobless benefits—broadly in line with the range that held for most of 2025.

But the report also showed that the number of continuing unemployment claims, a measure of the size of the unemployed population, rose by 28,000 to 1,974,000 in the week ended Nov. 8. That was the highest level since November 2021, and reflects a low-hire environment where it has been difficult for those workers who are laid off to find work again.

The latest data will likely do little to resolve the debate at the Federal Reserve, where some policymakers, wary of inflation, want to leave rates on hold, while others are pushing for a rate cut in December as insurance against a labor market deterioration.

Hawks can point to the bump up in job growth as a reason to postpone any further easing, while doves can focus on rise in the unemployment rate, as well as the general trend toward weaker job growth, as reasons to cut. Thursday’s report was the last official snapshot the Fed will see before the next rate-setting meeting in December. As a result of the shutdown, the Labor Department pushed back its release of the November jobs report to Dec. 16, the week after the rate decision. It will also release some October jobs data on that day.

“There’s no sign of a rapid deterioration in the American labor market that warrants a rate cut out of the Federal Reserve,” said Joseph Brusuelas, chief economist at RSM. Thursday’s data point to “sustained modest growth in the economy and employment,” he added.

Interest-rate futures implied the odds of a quarter-point cut at the December meeting stood at about 40% following Thursday’s report, up from about 30% earlier.

In September, employers added jobs at a steady clip in retail, construction, healthcare, leisure and hospitality and government. They let go of workers in transportation and warehousing and temporary help services. Those are often the industries that pull back on hiring first in a slowdown as households and businesses rein in spending.

Though greatly delayed—these numbers were initially scheduled for release on Oct. 3—the September report offered the first official look since before the shutdown on the state of a critical economic marker for investors and policymakers. The Federal Reserve, for instance, uses the job report to help it make decisions about interest rates.

While the federal data are incomplete, there are other signs that the labor market remains unsettled. Major companies including Amazon.com and Target recently announced they were cutting thousands of corporate jobs.

Meantime, consumer sentiment dropped in early November on concerns about the shutdown’s negative economic impact, according to a survey by the University of Michigan. More than 70% of households said they expect unemployment to increase over the next year.

A survey from the National Federation of Independent Business found small-business optimism also declined slightly in October. Owners reported lower sales and reduced profits, NFIB said, and many firms said they were having difficulty finding labor.

The third quarter was largely strong for company earnings—Nvidia reported record sales and strong guidance Wednesday, helping soothe jitters about an artificial-intelligence bubble. But some companies cautioned that consumers are increasingly bifurcated, with high income households spending strongly while younger and lower-income consumers are under strain.

Earlier this week, Home Depot reported lower third-quarter profit and trimmed its full-year outlook, as economic uncertainty, high interest rates and a stagnant housing market prompted homeowners to scale back home improvements.

“Our customers tell us that they remain on the sidelines due to uncertainty and perhaps the hesitation to make larger financial commitments amid an uncertain economic environment,” Chief Financial Officer Richard McPhail said Tuesday.

Target on Wednesday trimmed its profit guidance for this year, saying fewer shoppers visited its stores in the third quarter and those who did spent less. The quarter was volatile because of several external factors, such as the pause in federal food-assistance benefits funding and the government shutdown, according to incoming Chief Executive Michael Fiddelke.

Write to Harriet Torry at harriet.torry@wsj.com and Justin Lahart at Justin.Lahart@wsj.com