Why the unemployment rate dropped to 4.1% — and could almost have been 4%
In addition to strong job gains and a boost in workers’ pay, September’s jobs report also showed that the jobless rate dropped as well, landing at 4.1% (unrounded 4.051%).
The retreat in the unemployment rate partly reverses an upward trend seen during much of the past year.
However, while the unemployment rate has marched higher, it hasn’t been entirely due to negative reasons, economists have said. Jobless claims (a proxy for layoffs) have increased but not spiked; and since the government’s measure of unemployment captures folks who are actively looking for a job, the jobless rate also includes new entrants and reentrants to the labor force.
The mechanics for the unemployment rate dipping lower in September were as follows (as laid out by Michael Feroli, chief US economist at JPMorgan, in a note issued Friday):
The household survey (one of two that feed into the monthly jobs report) showed a 430,000 increase in employment and a 281,000 decrease in the ranks of the unemployed, which was the largest decline since early 2022.
“All categories of the unemployed — job losers, leavers, new and reentrants — declined last month, and the flows from unemployed to employed last month was the highest since early 2022,” he wrote.
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