The U.S. economy added just 29,000 jobs in September, while the unemployment rate rose to 4.2%, the Bureau of Labor Statistics reported Friday. Economists surveyed by Dow Jones had expected 84,000 new jobs and a jobless rate of 4.1%. Paychecks barely budged.
Average hourly earnings rose 0.1% for the month, bringing the 12-month gain to 3%, the lowest since May 2021. Wall Street had expected 0.3% and 3.1%. The average workweek stayed at 34.6 hours.
“Americans are frustrated by the lack of opportunities right now,” said Heather Long, chief economist at Navy Federal Credit Union. “Wage growth fell to a new 5-year low and is being wiped out entirely by inflation. That stings heading into the holidays.” Inflation remains well above the Federal Reserve’s 2% target. The central bank’s preferred gauge showed core inflation at a 3% annual rate.
Who Gained, Who Lost
Healthcare led the month’s gains, adding 17,000 workers. Construction added 11,000 jobs, while manufacturing added 9,000. Other sectors gave back jobs.
Government employment fell by 17,000. Temporary help services shed 11,000 jobs. Information services lost 10,000 amid concerns about artificial intelligence’s effect on jobs, and financial activities cut 7,000.
Revisions made the picture worse. Officials revised August’s gain down to 133,000, while July shifted from a gain to a loss of 10,000. Together, the changes wiped 60,000 jobs from earlier counts.
The data described a low-hire, low-fire economy. Weekly jobless claims remained low, and one indicator put layoffs at their lowest rate in four years. But for workers out of a job, low firing doesn’t mean much when few employers are hiring.
The Fed’s Calculus
Wall Street reacted quickly. Stock futures climbed sharply after the release, and Treasury yields fell after recently reaching levels not seen since the early part of the century. Traders saw the weak report as a reason for the Federal Reserve to hold rates at its Oct. 27-28 meeting. CME Group’s FedWatch tool put the market-implied odds of a hold at 82.8%.
“For the Fed, this number should be the nail in the coffin for an October hike,” said Thomas Simons, chief U.S. economist at Jefferies. He said August’s surge “was nothing more than a rebound from very weak hiring in June and July.”
The Federal Open Market Committee raised benchmark rates by a quarter percentage point in September. Policymakers have largely treated inflation as a greater threat to the economy than the labor market, which showed resilience in recent months. Markets now expect the committee to wait until December for its next hike. Long said she didn’t think the Fed would be dissuaded from hiking then, even though she called the labor market “stable.”
Mixed Signals
Some figures offered a brighter counterpoint. Household employment rose by 406,000, and the labor force grew by 485,000. The participation rate climbed 0.2 percentage point to 61.8%, its highest since May. An alternative unemployment measure, which counts discouraged workers and people working part time for economic reasons, edged down to 7.6%, its lowest since January 2025.
The broader economy appeared sturdier than the jobs data. The Commerce Department revised first- and second-quarter GDP growth to 2.5% and 2.2%, respectively. The Atlanta Fed was tracking third-quarter growth at 3.7%.
Why This Matters: Output growth isn’t translating into stronger paychecks or plentiful openings. Wages are rising at 3% while core inflation runs at the same rate, and Long says inflation is wiping out those gains. Meanwhile, the Fed is weighing further rate hikes aimed at inflation, and borrowing costs hit hardest for households already stretched thin. Job losses in government, temp work and information services suggest workers aren’t sharing the burden equally. From a center-left perspective, the report raises questions about how public institutions balance price stability against workers struggling to find opportunity. The Fed’s next moves will help answer them.