U.S. Adds Just 29,000 Jobs as Labor Market Loses Steam

The U.S. economy added only 29,000 jobs in September, a deeply disappointing result that fell far short of forecasts and signaled that the labor market has lost momentum. The unemployment rate ticked up to 4.2% from 4.1% the month before, while wage growth slipped to its slowest annual pace in more than five years, according to the Labor Department data reported by NPR.

The figure stunned analysts: economists surveyed by Dow Jones had expected job growth of roughly 84,000, while a separate LSEG poll had projected about 90,000, according to CNBC.

A Weaker Picture Than First Reported

The soft September headline was compounded by downward revisions to earlier months. July and August were revised lower by a combined 60,000 jobs, with July’s totals flipping from a small gain to a loss of 10,000, while August was cut from a gain of 162,000 to 133,000, Fox Business reported. The revisions suggest that what had looked like a summer rebound was, in fact, little more than a bounce from particularly weak hiring in June and July.

“The payroll data surged in August, and we had expected the momentum to continue this month, given the historically low prints on jobless claims in recent weeks,” said Thomas Simons, chief U.S. economist at Jefferies. “However, it now appears that the August number was nothing more than a rebound from very weak hiring in June and July.”

A Low-Hire, Low-Fire Market

Behind the weak headline lies a labor market that economists describe as “low-hire, low-fire” — employers are not cutting many jobs, but they are not adding them aggressively either. The result is a market that feels stable on paper yet offers little mobility to those looking for work.

“The good news is you’re not seeing a lot of layoffs,” said Sarah House, senior economist at Wells Fargo. “But it’s really hard if you are one of those workers who loses your job or you’re new to the labor force or you’re coming back, there’s not a lot of turnover. So it makes it harder to get your foot in the door right now.”

The household survey, which is used to calculate the unemployment rate, painted a somewhat stronger picture than the establishment survey used for payrolls. Household employment rose by 406,000, and the labor force swelled by 485,000. The labor force participation rate rose 0.2 percentage point to 61.8%, its highest since May. An alternative measure of unemployment that includes discouraged workers and part-time workers who want full-time jobs edged down to 7.6%, its lowest since January 2025.

Most of September’s modest job gains came from a handful of sectors. Healthcare added about 17,000 jobs, construction gained 11,000, and manufacturing rose by 9,000. Government payrolls contracted by 17,000, temporary help services shed 11,000 positions, and information services lost 10,000 jobs — a decline that comes amid growing anxiety about artificial intelligence’s effect on employment.

Wages Are Losing Ground to Inflation

For American workers, the most painful feature of the report may be wage growth. Average hourly earnings rose just 0.1% for the month, leaving the 12-month gain at 3.0% — the lowest annual level since May 2021. Wall Street had expected gains of 0.3% monthly and 3.1% annually.

With inflation still running above the Federal Reserve’s 2% target, that pace of wage growth is not enough to keep pace with rising prices. Core inflation, the central bank’s preferred gauge, was measured at a 3.0% annual rate in August.

“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.”

A Setback for the Fed — but Not Necessarily a Pivot

The weak report reshaped expectations for monetary policy. The Federal Reserve had raised its benchmark rate by a quarter point on Sept. 16, to a target range of 3.75%–4.0%, as it sought to contain inflation that has remained above target for five years. But after Friday’s data, traders sharply reduced the odds of another hike at the Fed’s Oct. 27–28 meeting. CME’s FedWatch tool put the probability of an October increase at just 17%, according to CNBC, down from roughly 36% a week earlier.

“For the Fed, this number should be the nail in the coffin for an October hike,” Simons said.

Yet economists caution that the central bank may not be finished tightening. “This report strengthens the case for the Federal Reserve to remain patient,” said Adam Schickling, a senior economist at Vanguard. “The labor market has not deteriorated sharply, but there is also little evidence that it has meaningfully strengthened, giving policymakers reason to wait for additional data.”

Odds of a December hike remain elevated — above 75% on FedWatch, though more modest at 65% on the prediction platform Kalshi. Long, of Navy Federal, agreed that the Fed is unlikely to abandon plans for a year-end increase.

Markets Cheer a Cooling Economy

Investors took the weak jobs data as welcome news, interpreting it as a sign that the Fed will not need to tighten aggressively. The S&P 500 rose about 1%, the Dow Jones Industrial Average gained roughly 0.6%, and the Nasdaq Composite climbed about 1.6%. Treasury yields slumped.

“Ultimately, today’s report is an ideal outcome for financial markets,” said Phil Camporeale, chief investment strategist at JPMorgan Wealth Management. “Both the stock and bond markets should take solace from the Federal Reserve not needing to aggressively tighten financial conditions to slow down an overheating economy.”

The upbeat market reaction contrasts sharply with the underlying data. The weak hiring figures sit awkwardly beside other signs of economic strength: the Commerce Department recently revised first- and second-quarter GDP growth upward to 2.5% and 2.2%, respectively, and the Atlanta Fed is tracking third-quarter growth at 3.7%. That divergence between solid output growth and stagnant job creation underscores how unevenly this expansion is being felt.

What to Watch

The central question now is whether September marks a temporary soft patch or the beginning of a more sustained slowdown. The Federal Reserve’s October meeting will offer the first clear signal, followed by the December decision that markets still expect to bring a rate increase. For now, workers face a labor market that offers stability to those already employed — but few doors opening for those still trying to get in.