US employers added just 29,000 jobs in September, well below the 90,000 increase forecast in a Reuters poll, while the unemployment rate edged up to 4.2% from 4.1%. The Bureau of Labor Statistics said both payroll employment and unemployment changed little over the month, but the headline gain marked a sharp slowdown from August. That month’s increase was revised down to 133,000 from 162,000, and revisions showed 60,000 fewer jobs were created across July and August than previously reported.
The report also showed a cooler wage picture. Average hourly earnings rose 0.1% in September after a 0.3% increase in August, reducing the annual gain to 3.0% from 3.1%. The average workweek held at 34.4 hours. Labor-force participation increased to 61.8% from 61.6%, and the household survey recorded a 406,000 rise in employment. That increase was not enough to absorb the 485,000 people who entered the labor force, leaving the unemployment rate slightly higher.
Hiring was uneven across industries. Construction employment increased by 11,000 and manufacturing added 9,000 jobs, while leisure and hospitality gained 10,000. Information payrolls fell by 10,000, financial activities lost 7,000 positions, and professional and business services declined by 9,000. Government employment dropped by 17,000, mostly in local government excluding education. The share of industries reporting employment gains fell to 49.0%, an 11-month low, from 57.6% in August.
Reuters reported that economists saw the figures as consistent with a low-hiring, low-layoff labor market rather than evidence of an abrupt deterioration. Payroll growth averaged 51,000 a month over the past three months, close to economists’ estimate that roughly 50,000 new jobs are needed each month to keep pace with growth in the working-age population. Initial unemployment claims have also remained near 57-year lows, supporting the view that employers have not broadly shifted toward layoffs despite slower recruitment.
Market reaction initially reflected a lower probability of another immediate Federal Reserve rate increase. Reuters said rate-hike odds for the Fed’s October 27-28 meeting fell to 13% after the release before recovering to about 23%, little changed from the prior day. Treasury yields first declined, then the benchmark 10-year yield reversed higher, while US stocks advanced and the Nasdaq 100 reached a record, according to CNBC and ForexLive. The dollar trimmed some gains after the report but remained supported by elevated Treasury yields.
What it means for traders: The data introduce a softer labor signal without resolving the Fed’s inflation problem. A sustained slowdown in payrolls and wages would reduce pressure for further tightening, which could weigh on the dollar and yields while supporting rate-sensitive equities. However, the report’s stable workweek, rising labor-force participation and absence of widespread layoffs limit the case for a rapid policy reversal. With inflation still the Fed’s central concern, markets may continue to react sharply to incoming price data and energy costs as well as employment figures.
The next focus is the Fed’s October meeting and the inflation releases that precede it. Traders will also watch whether October payrolls confirm September’s weak hiring or show that the late Labor Day calendar and seasonal adjustments distorted the latest reading. Revisions will remain important after July was changed to a loss of 10,000 jobs and the previous two months were cut by a combined 60,000. The balance between slower wage growth, persistent inflation and still-low layoffs will determine whether September becomes the start of a weaker labor trend or a temporary pause.