U.S. employers added 29,000 nonfarm payroll jobs in September, the Bureau of Labor Statistics reported Friday. Average hourly earnings rose just 0.1%, while the unemployment rate climbed to 4.2%. “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.”
Economists surveyed by Dow Jones had expected 84,000 new jobs and a 4.1% unemployment rate. The August jobs count was revised down to a gain of 133,000, while July payrolls shifted from a gain to a loss of 10,000. Taken together, the revisions showed 60,000 fewer jobs than previously reported.
Workers’ Pay and Jobs
September’s wage increase brought the 12-month rise in average hourly earnings to 3%, the lowest since May 2021. Wall Street had expected monthly wage growth of 0.3% and a 12-month increase of 3.1%. The average workweek stayed at 34.6 hours.
Healthcare added 17,000 workers, accounting for most of the month’s job gains. Construction added 11,000 jobs, and manufacturing added 9,000. Other sectors shed jobs: government employment fell by 17,000, temporary help services declined by 11,000, information services lost 10,000 amid concerns about artificial intelligence’s effect on jobs, and financial activities dropped by 7,000.
The household survey recorded employment growth of 406,000. The government uses that survey to calculate unemployment. The labor force grew by 485,000, and the labor-force participation rate rose 0.2 percentage point to 61.8%, its highest since May. By contrast, the establishment survey, which the government uses to calculate payrolls, showed much weaker job growth.
An alternative unemployment measure includes discouraged workers and people working part time for economic reasons. It edged down to 7.6%, its lowest since January 2025. Weekly jobless claims remained low, and one indicator showed layoffs at their lowest rate in four years. The report described a low-hire, low-fire economy, with limited hiring alongside low measured layoffs.
Markets and Federal Reserve Policy
Traders saw the report as support for the Federal Reserve holding interest rates at its October meeting. Stock futures rose sharply after the release, while Treasury yields fell after recently reaching levels not seen since the early part of the century. Market-implied odds of a rate hold at the Fed’s Oct. 27-28 meeting rose to 82.8%, according to CME Group’s FedWatch tool.
“For the Fed, this number should be the nail in the coffin for an October hike,” Thomas Simons, chief U.S. economist at Jefferies, said in a note. Simons said the August payroll number appeared to be a rebound from very weak hiring in June and July, not evidence of continuing momentum.
The Federal Open Market Committee raised benchmark rates by a quarter percentage point in September. After central bank policymakers made statements in recent days, markets expected the committee to hold off until December for its next hike. Fed officials assessed the economy ahead of their next rate decision and watched the unemployment rate more closely than the headline payroll figure.
Policymakers largely viewed inflation as a greater threat to the economy than the labor market. Inflation remained well above the Fed’s 2% target, while the latest reading of its preferred gauge showed core inflation at a 3% annual rate. Long called the labor market “stable” and said she didn’t think the Fed would be dissuaded from hiking in December.
The weak hiring report came alongside revised Commerce Department estimates showing gross domestic product growth of 2.5% in the first quarter and 2.2% in the second. The Atlanta Fed was tracking third-quarter growth at 3.7%.