Dive Brief:

• U.S. employers expanded payrolls in September by 119,000, higher than expected, while a surge in the number of people seeking work pushed up the unemployment rate to 4.4%, the highest level in nearly four years, according to Labor Department data released Thursday.
• July and August employment gains were 33,000 less than previously reported, the Labor Department said, after revising August data to a loss of 4,000 jobs and marking down July’s tally to 72,000.
• “We think September’s payroll estimate greatly overstates the strength of labor demand” and does not argue against a trim in borrowing costs by the Federal Reserve, Pantheon Macroeconomics Chief U.S. Economist Samuel Tombs said. “This report leaves a December easing in play, with payrolls rising briskly but the unemployment rate picking up,” he said in a note.

Dive Insight:

The fresh jobs report — delayed by more than six weeks because of the government shutdown — will likely do nothing to narrow a debate among central bank officials about the best path for monetary policy.

Those who lean toward a quarter-point reduction at a Dec. 9-10 scheduled meeting will point to rising joblessness and other signs of labor market weakness, while those who favor holding the federal funds rate steady will note the unexpectedly robust job growth in September and the need to curb above target inflation.

“Lowering interest rates to support the labor market risks prolonging this period of elevated inflation, and it could also encourage risk-taking in financial markets,” Cleveland President Beth Hammack said Thursday.

“This means that whenever the next downturn comes, it could be larger than it otherwise would have been, with a larger impact on the economy,” she said in a speech.

Other fresh data provide ammunition to both camps of policymakers. Weekly jobless claims, also released by the Labor Department on Thursday, revealed that 220,000 people filed for unemployment benefits during the week through Nov. 15, a figure roughly aligned with the trend this year.

Meanwhile, the National Federation of Independent Business said recently that optimism fell in October among small businesses. Small companies fueled 55% of job gains from 2013 to 2023, according to the Labor Department.

Participants at a central bank policy meeting last month, “expressed strongly differing views about what policy decision would most likely be appropriate at the committee’s December meeting,” according to minutes of the meeting released Wednesday.

Traders in interest rate futures bet on no change next month to the benchmark interest rate. They see 60.2% odds that the central bank will hold the main rate steady compared with 49.9% odds of such an outcome on Nov. 13, according to the CME FedWatch Tool.