The latest US employment data has reinforced a now-familiar characterization of the labor market: low hire, low fire. Employers are adding very few workers, yet they are not cutting existing staff at the pace typically associated with such weak hiring. This unusual combination leaves the labor market looking stable on the surface, even as workers face fewer opportunities to move between jobs and businesses remain cautious about expansion.
US employers added just 29,000 nonfarm jobs in September, far below the 84,000 increase expected by economists in the Dow Jones consensus. The unemployment rate ticked up to 4.2% from 4.1%, while labor force participation edged higher to 61.8%. The rise in unemployment was partly driven by an influx of 485,000 additional people looking for work, which pushed participation up from 61.6%.
The figures were also weaker than previously thought due to substantial downward revisions. July payrolls were revised from a 21,000 increase to a 10,000 decline, while August growth was cut from 162,000 to 133,000. Together, these revisions reduced payroll gains for those two months by 60,000. “This is a disappointing jobs report and a reminder that the low-hire, low-fire labor market never went away,” said Olu Sonola, head of US economics at Fitch Ratings.
Job openings show employers are holding back
The latest Job Openings and Labor Turnover Survey (JOLTS) offered another indication that employers are reluctant to expand their workforces. The US economy had 7.1 million job openings in August, down slightly from a revised 7.3 million in July, with the job openings rate declining to 4.3% from 4.4%. Hiring, however, remained steady at 5.2 million workers in August, and layoffs were stable at about 1.6 million, representing roughly 1% of employment. Voluntary departures stood at 3.1 million, or 1.9% of the workforce.
A separate report from global outplacement firm Challenger, Gray & Christmas showed that planned layoffs by US-based employers fell 18% to 43,281 in September, and were 20% lower than a year earlier. Announced job cuts so far this year total 573,195, down 39% from the first nine months of 2025. Planned cuts also fell 43% in the third quarter. However, hiring plans, while rising to 90,787 in September from just 12,325 in August, were still 23% below a year earlier and marked the lowest September tally since 2011.
What does low hire, low fire actually mean?
A conventional slowing economy often produces a familiar sequence: companies stop hiring, demand weakens further, and businesses eventually begin laying off workers. The current US labor market has so far avoided that second stage. Hiring has slowed considerably, but layoffs have remained relatively contained. That means workers who already have jobs are, in many cases, holding on to them, while people outside the workforce or looking to change jobs are finding fewer openings.
US Bank estimates that from January 2025 through August 2026, employers added an average of just 40,000 jobs a month, compared with more than 200,000 a month during the previous three years. Yet unemployment has remained relatively low, at or below 4.5% since late 2021. That divergence is at the heart of the low-hire, low-fire phenomenon. “It’s a lack of job increases rather than an outright occurrence of job reductions,” said Lia Taniguchi, head of research at recruitment service Bullhorn.
One of the clearest signs of this shift has been slower payroll growth. Average hourly earnings edged up 0.1% after rising 0.3% in August, lowering the annual increase in wages to 3.0% from 3.1%.
Why are employers not laying off aggressively?
Various data points show that businesses are not aggressively dismantling their workforces. Instead, they appear to be managing staffing levels cautiously, replacing some workers where necessary while avoiding broad-based expansion. “Businesses learned that mass layoffs can be expensive to reverse,” said Matt Schoeppner, senior economist at US Bank. “Instead, many are adjusting at the margins through hiring freezes, attrition and slower workforce expansion.” That behavior is particularly important because companies experienced severe labor shortages after the pandemic, making workforce rebuilding difficult and costly, and giving employers an incentive to retain workers even when demand softens.
Why companies are reluctant to hire
Several forces are contributing to the cautious approach. Tariffs and broader policy uncertainty have raised costs for some companies and made it harder to plan investments and staffing requirements, with goods-producing industries particularly exposed. Government spending reductions have also led to layoff announcements in some areas while weighing on confidence among federal contractors and related businesses.
Consumer demand is another constraint. Lower- and middle-income households continue to face affordability pressures, limiting discretionary spending and reducing the incentive for some consumer-facing companies to add employees. Artificial intelligence is adding another layer of uncertainty. Companies are increasingly adopting AI tools that can allow existing employees to handle more work, potentially reducing the need to expand payrolls. The effect may be particularly visible in some entry-level technology positions, where companies are reassessing staffing requirements. At the same time, the AI buildout is creating demand for workers in areas such as data centers and chip manufacturing, though these gains may not offset the broader hiring slowdown.
This article is for informational purposes only and does not constitute financial advice.
