Data Preview & Forecast
MUFG forecasts September 2026 nonfarm payrolls (NFP) to grow by 90k, in line with the median of 85k from Bloomberg contributors, and slightly above the 3-month average growth of 71k.
The unemployment rate (U/R) is expected to remain at 4.1% in September, in line with the median estimate from Bloomberg contributors. A slight drop in labor force participation of older workers (55 & over), consistent with growth in those not in the labor force due to retirement, can offset improvements in participation of prime age workers (25-54). However, an uptick in job losses MoM, driven by normal volatility, can push unemployment up to 4.2%.
A “normalization” in monthly jobs growth in leisure & hospitality and local government, following the strong recovery in August, supports overall September jobs growth to come within a 70-110k range.
Market Thoughts
Base-case risk: Given the larger than normal rates move, and then a reversal in the day leading up to this NFP report, a consensus figure that reinforces the “stable” labor market narrative is unlikely to elicit a strong market reaction. However, the current momentum can carry into Friday morning, with a small rally across the rates curve, led by the front-end with expectations of an October hike falling further.
Downside risk: Rates across the curve have been experiencing different speeds lately, where the front-end is relatively anchored while the backend has been grinding higher. A notably weaker than expected report (soft headline NFP or higher U/R) should prompt a bull flattening move, with the 10Y UST rallying on a weaker growth outlook.
Upside risk: An especially strong jobs figure would likely incite a bear steepening move, more so than added Fed hikes being priced in, because once again, it would support a stronger growth outlook.
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