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US Job Market Stays Strong

2025-10-03

Pierre Dongo-Soria, CFA

Pierre Dongo-Soria, CFA

Principal Investment Strategist, EMEA




Economic insights Market insights
Welcome to the market weekend review. I'm Pierre Dongeria, strategist at Russell Investments based in London. This week we will cover three key themes. The US government shutdown, US labor market data, and European inflation. Let's dive in. This week the US government enter a shutdown after Congress failed to pass funding a funding bill which means many federal employees are furlow without pay and a number of public services are disrupted. So far markets have not been impact. This isn't the first shutdown we've seen and history shows they tend to have only a small economic impact and often last less than two weeks. But there are risks to monitor. Of course, some agencies can turn temporary fur laws into permanent job cuts, which could weaken the labor market more than expected. And another impact is that a key data may be delay, making it harder for investors to get the full picture just as the Fed prepares for its next week meeting. So, while it may feel disruptive, this is more political noise than market signal. And although we are in October, it's too early to get a spook. We also get fresh data on the US labor market. ADP reported that private perils fell by about 32,000 in September, a large negative number uh and surprise versus expectations and the biggest drop in more than two years. Part of that weakness comes from a preliminary benchmark update, but the broader theme of software hiring momentum is clear. However, layoffs remain contained. The latest jobs survey showed that layoff rate is steady at just over 1%. Which is very low by historical standards. So there's a nuance here. It's a weak labor market in terms of hiring but not in terms of people losing their jobs. The stock of employment is still is solid as freedoms hang on to workers but both the flow into the jobs market through new hiring as well as the flow out of it are weak. In Europe, the flash inflation numbers for September show a pick up to 2.2% from 2%. While core held steady at 2.3% and services inflation push higher just above 3%. Which is part of an important metric that the ECB watches most closely for domestic pressures. Meanwhile, the country level data was a bit more mixed. Inflation pick up again in Germany and Spain while France stay much lower. The picture isn't uniform, but it suggests that inflation is aging up at the margin with services still sticky, and this is likely to keep the ACB cautious. After a series of cuts earlier this year, the market view is shifting towards a longer pause, reinforcing the sense that the central bank is now on hold mode. So, that was the weekend review. Thanks for watching. Hi, I'm Sophie Antelbe, head of portfolio and business consulting at Russell Investments. If you liked what you just saw and heard, consider subscribing to our YouTube channel or check us out on LinkedIn. Thanks for tuning in.

Key Takeaways

  • Minimal economic fallout expected from U.S. shutdown
  • Private-sector jobs decline in September
  • Eurozone inflation edges up

On this week’s edition of Market Week in Review, Pierre Dongo-Soria, principal investment strategist for EMEA, assessed the potential impacts of the government shutdown in the United States as well as the health of the country’s labor market. He also explained how the latest European inflation numbers could affect upcoming monetary policy decisions. 

Shrugging It Off

Dongo-Soria started by noting the U.S. government ground to a halt Wednesday after lawmakers failed to reach an agreement on funding. As a result, many federal employees have been furloughed while some public services have been disrupted.

The U.S. stock market, however, has hardly blinked, with the S&P 500 hitting a new record Wednesday afternoon. Why? A look to history shows government shutdowns typically only have minor economic impacts and often last less than two weeks, Dongo-Soria said.

However, there are still some risks to monitor, he noted. “There’s a possibility some agencies could turn temporary furloughs into permanent job cuts, which could weaken the labor market more than anticipated,” Dongo-Soria explained. In addition, the shutdown means the release of some key data indicators—including the September jobs report—will be delayed. This makes it harder for U.S. Federal Reserve officials to get a full snapshot of the labor market ahead of their meeting later this month, he said.

Ultimately, though, the government shutdown is more about political noise than any kind of market signal—and there’s no reason for investors to be alarmed now, Dongo-Soria stated. “Although we are in October, it’s too early to get spooked,” he quipped.

Hiring Slump

Focusing more on the U.S. labor market, Dongo-Soria said ADP’s report on private-sector employment was released this week. The report showed private companies cut 32,000 jobs during September, marking the biggest decline in more than two years.

“This is a large negative number that fell significantly short of expectations for a positive gain,” Dongo-Soria remarked. While some of the weakness can be attributed to a benchmark update, the numbers clearly point to a slowdown in hiring, he said. On the flip side, layoffs remain low, with the latest JOLTS (Job Openings and Labor Turnover) survey putting the layoff rate at just over 1%—a very low number by historical standards, Dongo-Soria noted.

Together, these reports point to a quiet labor market marked by sluggish hiring but a low turnover rate, he said. 

Pressure Rising

Dongo-Soria finished by reviewing the latest inflation numbers from the eurozone. He said the region’s inflation rate rose from 2% in August to 2.2% in September, while core inflation held steady at 2.3%. Services inflation, meanwhile, edged up to 3.2%—a move that’s likely to grab the European Central Bank’s (ECB) attention, Dongo-Soria said.

“ECB officials pay particular attention to this metric, as it’s often a leading indicator of domestic price pressures,” he explained.

Dongo-Soria said at the country level, the overall inflation numbers were more mixed, with inflation rising in Germany and Spain while softening in France.

“The picture in Europe isn’t uniform, but the September numbers suggest inflation is edging up at the margins, with services inflation particularly persistent,” he stated. This means the ECB will likely keep rates unchanged at its next meeting, Dongo-Soria said, noting markets also expect the bank to continue holding off on rate cuts. 

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