October 15, 2026

As the calendar turns to autumn, the labor market appears to be a quintessential on-the-one-hand-on-the-other-hand story.

Signs like increased monthly job growth point to strengthening. Yet more subtle measures, such as relatively low job quits, suggest less robustness. So is the US employment market decisively turning around after more than a year of sluggishness?

Answering that question is complicated, even for seasoned labor market economists.

To be sure, there's a wealth of data to sift through to try and divine the labor market's health and direction. Yet no single set of indicators consistently charts the path ahead with anything approaching sure-fire accuracy, said Julie Hotchkiss, an Atlanta Fed research economist and senior adviser who specializes in labor markets.

Labor economists marshal numerous statistics in the service of forecasting: employment of temporary workers, total hours worked-which often climb before jobs numbers-the rates of hiring, firing and quitting, and labor force participation, to name a few. All those are helpful and important.

With those statistics and others as grist, the Fed has built numerous tools to analyze labor markets. The Atlanta Fed in 2013 introduced the Labor Market Distributions Spider Chart, a compendium of metrics meant to illustrate the relative strength and weakness of each statistic over time. A little earlier, the Kansas City Fed devised the Labor Market Conditions Indicators that synthesize two dozen monthly variables to diagnose the job market's health and momentum.

All those instruments are illuminating. "But there's not one thing that has proven consistently good" at precisely predicting the course of the US labor market, Hotchkiss said.

So, even in placid times, declaring that the labor market has reached a decisive turning point can be a walk out onto a flimsy limb.

"You might say it's a turning point, and the next month the data say otherwise," said Paul Mohnen, another Atlanta Fed labor economist.

Such is the nature of economics. It's easy to be wrong when trying to draw conclusions from an almost endless array of permutations and possibilities, subject to sudden jolts from unpredictable macroeconomic and geopolitical forces.

One such jolt in the past couple years is a sharp slowing in labor force growth because of an aging population and curtailed immigration.

That's drastically changed the math. In a March 2026 article, economist John O'Trakoun of the Richmond Fed wrote that if you examined prepandemic relationships between various labor market factors, you'd expect to see that the hiring rates of late 2025 and early 2026 would result in an unemployment rate between 6 and 10 percent, far higher than the 4.1 to 4.4 percent rates of 2026.

"Noisy" data

In such a fluid environment, it's perhaps not surprising that labor market data tend to be "noisy"-they can jump around from month to month.

For instance, just through the first nine months of 2026, employment growth reported by the US Bureau of Labor Statistics (BLS) fluctuated wildly: a loss of 156,000 jobs in February, gains averaging 142,000 in March through May, but then a smaller boost of 51,000 jobs a month on average for July through September (see the chart).

Bear in mind that in a labor market with 160 million workers and several million employers, even the best data are estimates-highly scientific estimates, but still estimates. The BLS issues monthly employment growth statistics within a "90 percent confidence interval." In August, for instance, the BLS reported it was 90 percent confident that the economy added between 37,900 and 284,300 nonfarm jobs. Split the difference and you get the initial official monthly number: 162,000 new jobs. From there, BLS economists and analysts produce more precise revisions over time.

The state of the labor market today

Turning to the muddled state of play right now, first consider the on-the-one-hand positives.

By the broadest possible measure, the labor market looks solid. The unemployment rate has lingered under 4.5 percent since last November, a monthly level achieved just 12 percent of the time in the 50 years before the pandemic. The worst-case scenarios that appeared possible last year have not materialized, and things looked worrisome in 2025. Excluding the pandemic year of 2020, it was the worst year for job creation since the Great Recession.

A few months on, the picture looks brighter. Job creation perked up in the spring and summer of 2026: monthly job growth averaged 87,000 for March through September, a sharp rebound after cumulative job losses over the previous six months.

Hiring also was relatively widespread. The BLS "diffusion index" showed that more than half of 250 private-sector industries added jobs in eight of nine months of 2026 through September, after the index hit that halfway mark-a reading of 50-in only three months of 2025. Last year was unusual, as the index has rarely dipped below 50 outside of recessions.

Even manufacturing employment eked out a gain through the first nine months of 2026 after 23 consecutive months of losses. Finally, in another positive sign, the labor force participation rate among 25- to 54-year-olds-prime-age workers-has lately hovered near its highest levels since the year 2000, though it slipped a bit in the summer.

On the other hand...

Now for the other hand, which points in a less promising direction. First, like the macroeconomy, uncertainty casts a shadow over the labor market. Most notably, the Iran conflict and related oil price shock could keep energy prices high for many more months, possibly prolonging broader inflation and widespread economic uncertainty, according to Atlanta Fed contacts. Ongoing uncertainty is one reason the Reserve Bank's contacts almost unanimously report they plan little hiring the rest of this year, echoing nationwide feedback reported in the Fed's Beige Book.

And the improved employment growth in 2026 remains comparatively pedestrian. March through September monthly job growth amounts to about a fourth of the monthly average for 2021 through 2024.

Moreover, a key source of dynamism is dragging. Labor market churn-the economist's term for people changing jobs and moving into and out of work-has been subdued in the ongoing low-hire, low-fire labor market. Less churn could indicate the labor market isn't as strong as improved employment growth alone would suggest, said Mohnen, who recently wrote an Atlanta Fed Macroblogpost on this phenomenon.

Excluding the months amid the pandemic, US workers this year and in late 2025 have quit jobs at the lowest rates since 2015, per data from the BLS Job Openings and Labor Turnover Survey. The hiring rate has been similarly subdued.

As Mohnen wrote, the economy-wide hiring rate has declined for the past few years as the rate of layoffs has remained low. Meanwhile, the quits rate and the rate at which people move from job to job have also fallen since their postpandemic highs, a circumstance Mohnen describes as a shift from the "Great Resignation" to the "Great Stay."

Anecdotal evidence supports the data. Many Southeast business leaders in recent weeks told the Atlanta Fed's Regional Economic Information Network staff that employee retention rates at their firms are at record highs-nobody is quitting.

While that can be good for companies, if it lasts long enough it can hobble the jobs market. Historically, churn has been an essential ingredient in the labor market's dynamism. To be sure, most people don't change jobs in a given month, yet with 160 million people working, more than 5 million typically get hired, fired, or quit a job each month. About half of all job openings, in fact, are created by people leaving a position, as opposed to employers filling new openings created by business expansion, Mohnen pointed out. So, a more static labor market with fewer job openings makes it harder for job seekers to find work.

Mohnen points out that the average duration of unemployment spells has indeed steadily lengthened in recent years. Moreover, he noted, the dwindling number of openings has hurt new labor market entrants, as indicated by a rising unemployment rate among recent college graduates.

Job mobility is also an important source of wage growth for workers, as it allows people to migrate to jobs where they can put their skills to the highest use. Bottom line: A dynamic labor market with lots of openings and hires every month, as the US has generally enjoyed, allows workers to more readily find work that's best for them and the economy.

By contrast, Mohnen wrote, "lower churn puts downward pressure on wage growth and productivity."

Take a trained electrical engineer who works as an IT support technician. This person would likely be better off working as an electrical engineer. It would be better for the firm that employs her as an engineer, presumably, to fill that job, and it would be more productive for the economy as a whole.

"Certain matches between firms and workers are more productive than others," Mohnen said. "It can be a long process to achieve those matches[PM3.1]. But the more that happens, the better it is for the economy since it raises productivity and facilitates job creation."

Those are well-understood effects of diminished labor market churn. Beyond those, more subtle consequences could include companies having more trouble "organically downsizing" through attrition, according to Mohnen, because workers are clinging to jobs. Over time, that could lead to more widespread layoffs if the economy slows. And in a time of limited hiring, like the present, unemployment could spike and take a long time to recover.

Where does this leave us?

Add it all up and the good news-bad news narrative points to a stabilizing labor market, but perhaps no imminent surge. According to three Atlanta Fed experts, despite an uptick in monthly payroll job growth, other factors such as subdued churn and wage growth that has lagged inflation suggest a significant turning point is probably not at hand.

Hotchkiss said the likeliest diagnosis remains a labor market in a holding pattern, relatively stable but not roaring. Mohnen agreed, noting that a couple months of solid job growth is not enough to herald a marked turnaround.

"I think we have to wait to find out more definitively," he said.

Another Atlanta Fed labor market specialist, vice president and senior economist Jon Willis, added: "Have we turned a real corner? Not really."

That question matters to the Fed because pursuing maximum employment is one of its two primary duties assigned by Congress, along with price stability. Maximum employment is not a precisely defined state, and in fact it looks different when the labor force is barely growing, like now, compared to times when millions of new people are seeking jobs each year. That lack of clarity makes it all the more important to thoroughly understand the ever-changing US labor market.

To calibrate monetary policy to best achieve maximum employment and price stability for the American people, Fed policymakers need the best possible read on both the labor market and prices across the economy.

Sidebar: As Economic Growth Goes, So Goes the Job Market (Usually)

The labor market does not exist in a vacuum. It is generally shaped by the fortunes of the broader macroeconomy (see the chart).

This sort of marching in tandem is typically a good thing for workers, as the US economy and labor market are normally growing. The economy has been in recession less than 10 percent of the time during the past 50 years, according to the National Bureau of Economic Research.

Consequently, the labor market has generally thrived. In the past 50 years, nonfarm employment has doubled to nearly 160 million workers as the population grew by nearly 130 million. Just since the Great Recession, the US economy has added roughly 30 million jobs, about the equivalent of another California, Florida, and Alabama combined worth of employment.

Going back even farther, the BLS began compiling monthly economywide job numbers in 1939. Since then, employment has increased in 70 of 88 years. Employment has shrunk in just one decade since then. In the first decade of the 21st century, the Great Recession wiped out nearly 9 million jobs in just two years, resulting in a cumulative loss of 1.2 million jobs between 2000 and 2010.

Those numbers show that for much of its recent history, the nation has enjoyed a dynamic labor market fed by an ever-growing population. But declining birth rates and limited immigration have slowed population growth in recent years.