How high will unemployment get in 2026?

Fed minutes: “With regard to the outlook for monetary policy beyond the current meeting, most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end.” https://www.federalreserve.gov/monetarypolicy/fomcminutes20260916.htm

Our September 2026 Survey of Consumer Expectations shows that households’ inflation expectations increased at the short- and medium-term horizons and remained unchanged at the longer-term horizon. Labor market expectations mostly improved with unemployment rate, job finding, job loss, and quit expectations all improving.

This ho-hum labor market report doesn't really change the story for the Fed, whose senior officials had gone out of their way this week to signal that an October rate hike probably wasn't their base-case. The biggest development was what it didn't show: few signs from wages or the unemployment rate that the labor market is tightening in ways that would add meaningfully to price pressures. The September CPI, due Oct. 14, was always going to be more important than this report, which nevertheless takes some of the hawkish edge off of the recent repricing of the Fed's path in markets.

The 3-month average hiring rate, initially reported at 71,000 for Aug, is now revised to 51,000, and the 3-month average hiring for Sept was also 51,000 The picture is similar for private-sector employment, which was +54,000 for Sept, up from a downwardly revised +48,000 in Aug

Job growth over the last three months was a little bit softer than previously reported and the unemployment rate rose to 4.2%.

Core PCE was +0.25% in August, which annualizes to 3%. July is now reported to be +0.13% (same as June), which brings the three-month annualized reading to 2%. The 12-month increase in core prices was 3.0% in August.