A jobs report on Friday will provide a key gauge of economic health as the United States weathers a surge of inflation set off by the Iran war seven months ago.
The fresh data is set to arrive weeks after the Federal Reserve imposed its first interest rate hike in three years. The move aims to dial back price increases, but it risks an eventual slowdown in hiring as borrowing costs weigh on businesses.
The economy has shown signs of strain in recent months, including a bond selloff that threatens to raise consumer borrowing costs and a resurgence in oil and gasoline prices.
Consumer sentiment dropped last month close to the lowest level ever recorded in the 74-year history of the University of Michigan's survey.
Despite these headwinds, the labor market has proven sturdy so far this year -- and such growth is expected to have continued in September.
Economists expect U.S. employers to have added 84,000 jobs in September, which would mark solid performance but a slowdown from 162,000 jobs added in August.
The U.S. added an average of about 80,000 jobs per month over the first eight months of this year, financial services firm Raymond James found in an analysis of Bureau of Labor Statistics data. That pace exceeded Raymond James' expectations of 70,000 jobs added each month over that period.
The Iran war drove up gasoline prices and catapulted inflation to a three-year high. Inflation eased over the summer, but continued fighting has kept prices increases well above pre-war levels.
The annual inflation rate stands at 3.4% as of August, the most recent month on record, putting inflation more than a percentage point above the Fed's target rate of 2%.
The combination of elevated inflation and a resilient labor market prompted the Fed to raise interest rates a quarter of a percentage point last month.
Investors peg the chances of another rate increase in October at one in three, meaning borrowing costs could rise further within weeks, according to CME Group’s FedWatch Tool, a measure of market sentiment.
"The plain fact is that inflation is too high and has been for too long," Fed Chair Kevin Warsh said at a press conference in Washington, D.C., last month.
An increase to the benchmark interest rate raises borrowing costs for consumers and businesses, which in theory should slash inflation by slowing the economy and eating away at demand.
The policy risks a downshift in hiring and an uptick in the unemployment rate, though such fallout typically takes hold after a lag time lasting several months.
By some measures, the economy remains robust.
Gross domestic product grew over three months ending in June, defying fear of a downturn triggered by the Iran war. Consumer spending, which accounts for about two-thirds of U.S. economic activity, rose 0.6% in August from July, the largest monthly increase since March 2025, government data on Wednesday showed.