Payroll surge meets flat unemployment

Despite the reacceleration in payrolls growth since last summer, the unemployment rate is essentially unchanged. While hiring momentum has picked up meaningfully, the lack of follow-through in the unemployment rate highlights a growing disconnect in labor market signals. “What constitutes as a strong payrolls print, may be much higher than it was last year,” says Garrett Melson, CFA^®, Portfolio Strategist at Natixis Investment Managers Solutions. The divergence raises important questions about how much slack remains and whether stronger job gains are truly signaling tighter conditions.

Nonfarm Payrolls Growth vs Unemployment Rate (8/31/25 — 5/31/26)

• Over the past three months, despite payroll growth surging from 73k to 188k, the unemployment rate has actually edged up 4 bps.

• Consumer sentiment around labor markets remain in the dumpster, with the NY Fed’s Survey of Consumer Expectations showing job find prospects near record lows as job loss perceptions push back toward the highs.

• The recent inflection in payrolls has been sharp, but the lack of confirmation from unemployment underscores uncertainty around the durability of the rebound.