09.15.2026 - Payroll’s Seasonal Adjustment Disorder

As released earlier this month, for the 12 months ended August 2026, total seasonally adjusted payrolls increased by 603,000. August’s monthly number (162,000) represents over 26% of that annual increase. Unadjusted payroll growth, however, shows 456,000 new jobs over the past 12 months, with August’s monthly number (154,000) representing over 33% of the annual total. No doubt, August was a strong number on both an adjusted and unadjusted basis. However, the unadjusted annual growth trendline seems to be running out of steam, not spiking upward like the adjusted one — and they have diverged significantly. The adjusted and unadjusted annual growth lines tend to be very close, not where they stand now, at 2.5 standard deviations apart.

The markets interpreted the strong August payrolls number as providing the Fed with cover for a September tightening. However, if the unadjusted annual trend is right, it appears that annual payroll growth may have topped out in the near term. Maybe it’s just a pause in a more general uptrend. Maybe not. If history holds, the two lines should converge in the next couple of months.