sector

Downward revisions and finance and insurance job losses paint a pessimistic picture for the U.S. labor market.

In the last jobs numbers report before a contentious U.S. mid-term election, the Bureau of Labor Statistics (BLS) reported that seasonally adjusted nonfarm payrolls added 29,000 jobs in September, while the unemployment rate remained stable at 4.2%

The BLS also revised its July numbers for a second time, now showing a loss of 10,000 jobs compared to its first revision, which upped the number of jobs created to 21,000 from a loss of 23,000 jobs. It also revised August’s number down to 132,000 from 162,000.

The report may have underwhelmed market expectations, but economists at RBC say that doesn’t mean the labor market is weak.

“The 29,000 payroll gain is quite healthy in the context of our breakeven estimate of 20,000 jobs per month,” they wrote in an RBC Economics note. Gains were broad-based, and the declines more likely reflect retirements than layoffs, especially in sectors with an older workforce (e.g., the median worker age in financial services is 44.2 years compared to 42.1 years overall). Despite a slowdown in health care hiring, strength was driven by the goods sector, which continued to recover from the post–Liberation Day layoffs earlier in 2025.”

Finance Sector Feels the Bite

Despite the overall positive number, the finance and insurance sector lost 7,000 jobs, with credit intermediation and related activities accounting for 4,600 fewer jobs, followed by insurance carrier and related activities, which lost 2,300 positions.

Employment in the capital markets remained unchanged, with no job gains or losses compared to August.

The information industry took a harder hit than the finance and insurance sector, losing 10,000 jobs. Publishing lost 4,000 jobs, while broadcast and content providers lost 3,000 jobs, and computing infrastructure providers, data processing, and web hosting and related services eliminated 1,600 jobs.

Private Optimism

Using a proprietary methodology developed with the Stanford Digital Economy Lab, ADP is far sunnier in its view, estimating that U.S. private employers added 90,000 jobs over the same period, according to its  ADP National Employment Report for September.

“It’s a strong report. After a three-month slowdown, job creation rebounded, and pay growth remained solid,” said Nela Richardson, chief economist at ADP, in a prepared statement.

However, the report’s authors have no good news for those working in financial activities, which lost the most jobs (-16,000) of any sector, while professional and business services lost the second-largest amount (-11,000). 

The information sector managed to eke out growth, adding 3,000 new positions.

Mid-sized companies (50 to 499 employees) created more than half of the new jobs (54,000). Small companies (1 to 49 employees) added 23,000 new positions, while large companies (more than 500 employees) added the fewest jobs (14,000).

However, not everyone shares the optimism.

The BLS report reflects an economy that has not set itself up for growth, Michele Evermore, a senior fellow at the National Employment Law Project, told Global Finance.

“Nobody was planning to build a manufacturing economy in the United States again,” she said. “Growth was going to come from innovation. If we get rid of the core government research, that is what was going to build jobs of the future, I’m afraid this is par for the course for the foreseeable future until either the AI bubble crashes or AI turns out to be amazing and starts taking over jobs.”

Rob Daly covers fintech and the economy. Contact him at rdaly@gfmag.com.

Fed rate hikes threaten to further strain direct lenders as private credit default rates hit record highs.

The private credit industry keeps insisting it’s fine. The data keeps suggesting otherwise, and Wednesday’s interest rate hike from the Federal Reserve isn’t going to help the argument.

The Federal Open Market Committee officially raised the federal funds target range by 25 basis points to 3.75%-4.00%. The decision, which was unanimous among the 12 board members, marks the first rate hike since 2023.

“Whenever the Fed increases rates, the pressure on the liability side becomes very high,” David Yahalomi, chief operating officer and co-founder of Tel Aviv-based loan-management platform Hypercore, said in an email.

Companies that borrow through direct lending typically carry floating-rate debt, meaning their interest costs rise automatically whenever the U.S. central bank moves rates. The hike officially pushes up borrowing expenses at a moment when defaults are already climbing to levels not seen before.

“In the event of a prime rate increase, this structure shrinks [private credit portfolio company] margins,” Yahalomi added. And the squeeze is already showing up in the numbers.

Borrowers Buying Time

A Fitch Ratings report from Monday shows that the U.S. Private Credit Default Rate, or PCDR, hit 6.3% for the 12 months ended in August. That’s up from 6.1% in July. The rate has now held at or above 6.0% since April. Here’s the credit rating agency’s breakdown of the findings:

• Volume Surge: August logged 109 default events across 89 unique defaulters (up from 105 and 83 in July). The month alone saw 14 default events — a trailing-year high — driven by 11 new defaulters and three repeat offenders.

• Punting the Debt: Distressed maturity extensions made up 45% of August events (41% over the past year), while payment-in-kind (PIK) structures and interest deferrals represented 47% TTM. Hard payment defaults comprised just 8%.

• EBITDA Impact: Companies with less than $25 million in EBITDA posted a 12% default rate in August, though that’s actually down slightly from 12.3% in July. The bigger warning sign came from the $26 million-to-$50 million EBITDA bracket — Fitch’s largest cohort — where the default rate jumped to 5.2% from 3.9% in a single month.

• Sector Hotspots: Healthcare and industrials tied for the highest default rates at 9.9%, while consumer products ticked down to 8.7%. Software posted a default rate of just 0.6% in August. That’s down from 1.2% in July and 2.0% a year ago — the lowest of any major sector.

While the overall PCDR blends middle-market CLO ratings (MCO) and insurer-monitored private ratings (PMR), August’s rise was driven by record stress in MCOs (5.6%), even as PMR rates eased slightly to an elevated 8.5%.

PIK Portfolios Are Insulated — For Now

Harvey Tian, head of loan operations at Suntera Fund Services, said a size-weighted view changes how PIK interest should be read as well.

“Once the prime rate goes up, the terms on all the rates will increase, and it will definitely put pressure on the borrower side — the ones paying cash interest,” Tian told Global Finance on a call.

Loans structured with PIK options, however, aren’t paying cash interest at all, he noted. That insulates that particular pool of borrowers from a higher interest rate.

“I don’t see a huge effect on the underlying portfolio of PIK borrowers if it’s a one-time hike,” Tian said of Wednesday’s Fed announcement. A quarter-point increase would phase into the PIK rate structure over time rather than land all at once.

Multiple hikes are a different story, given the inflationary pressures caused by a worsening U.S.-Iran conflict.

Anthony Noto covers corporate finance and private credit. Contact him at anoto@gfmag.com.