The U.S. added 29,000 nonfarm payroll jobs in September, well below economists’ expectation of 84,000, while unemployment climbed to 4.2%, the Bureau of Labor Statistics reported Friday. The figures put the Federal Reserve’s next interest-rate decision at the center of the economic response. Workers, meanwhile, faced weaker hiring and wage growth at its lowest level since May 2021.
The Jobs Picture
Revisions lowered August’s payroll gain to 133,000 and turned July’s reported increase into a loss of 10,000. Together, the changes brought the job count down by 60,000 from earlier reports. They recast the earlier hiring increase as a short rebound, not evidence of continuing momentum.
The household survey, which the government uses to calculate unemployment, recorded an employment increase of 406,000. The labor force expanded by 485,000, while the labor-force participation rate rose 0.2 percentage point to 61.8%, its highest level since May. That survey painted a considerably stronger picture than the establishment survey used to calculate payrolls.
An alternative unemployment measure includes discouraged workers and people working part time for economic reasons. It edged down to 7.6%, the lowest level since January 2025. Weekly jobless claims remained low. One indicator put layoffs at their lowest rate in four years.
Healthcare led September’s payroll gains, adding 17,000 workers. Construction added 11,000 jobs, and manufacturing added 9,000. Government employment dropped by 17,000, temporary help services fell by 11,000, information services lost 10,000 amid concerns about artificial intelligence’s effect on jobs, and financial activities shed 7,000.
The Fed’s Decision
Markets saw the report as a reason for the Federal Reserve to hold rates at its October meeting. Stock futures jumped after the release, while Treasury yields fell after recently reaching levels not seen since the early part of the century. According to CME Group’s FedWatch tool, market-implied odds of the Fed keeping rates steady at its Oct. 27-28 meeting rose to 82.8%.
“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. He said August’s payroll data had surged and economists expected momentum to continue, given historically low jobless claims in recent weeks. “However, it now appears that the August number was nothing more than a rebound from very weak hiring in June and July,” Simons said.
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 reset expectations and anticipated that the committee would wait until December for its next hike.
Wages and Economic Pressures
Average hourly earnings increased 0.1% in September, putting the 12-month gain at 3%. Wall Street had forecast monthly and annual increases of 0.3% and 3.1%, respectively. The average workweek held at 34.6 hours.
“Americans are frustrated by the lack of opportunities right now,” said Heather Long, chief economist at Navy Federal Credit Union. Long said wage growth had fallen to a new five-year low and was “being wiped out entirely by inflation.” She called the labor market “stable” and said she didn’t think the Fed would be dissuaded from hiking in December.
Policymakers largely saw inflation as a bigger threat to the economy than the labor market, which had proved resilient in recent months. Inflation remained well above the Fed’s 2% target. The latest reading of its preferred gauge showed core inflation running at a 3% annual rate.
The weak hiring report arrived alongside stronger growth estimates. The Commerce Department revised gross domestic product growth for the first and second quarters to 2.5% and 2.2%, respectively, while the Atlanta Fed was tracking third-quarter growth at 3.7%.