U.S. Adds Just 29,000 Jobs in September, Missing Forecasts

U.S. employers added only 29,000 jobs in September, a fraction of what economists had expected, while the unemployment rate ticked up to 4.2% from 4.1%, the Bureau of Labor Statistics reported Friday. The figure landed well below the roughly 90,000 forecast by analysts, and downward revisions to the prior two months erased even more of the labor market’s recent momentum — making it the final jobs report before November’s midterm elections.

A Labor Market Treading Water

The September gain was less than a third of the consensus estimate, according to financial data firm FactSet. More troubling for economists, the government revised down payroll growth for July and August by a combined 60,000. July’s figures were revised to a net loss of 10,000 jobs, meaning the economy actually shed positions that month, The Guardian reported.

Hiring was muted across nearly every industry. Healthcare — this year’s most reliable source of new jobs — added just 17,000 positions, while financial activities shed 7,000. Construction and manufacturing posted modest gains of 11,000 and 9,000 respectively. The BLS noted that “employment in all major industries changed little over the month.”

“Only healthcare and construction were hiring, and it was weak,” said Heather Long, chief economist at Navy Federal Credit Union. “Across America, people don’t like this labor market. It’s not hard to see why. There’s still not much hiring going on.”

Wages Lag Inflation for a Fifth Straight Month

The softness in hiring was compounded by weak wage growth. Average hourly earnings rose just 0.1% for the month, to $37.81 an hour, and annual growth slowed to 3.0% — the weakest pace since May 2021. That trails the most recent inflation reading of 3.4%, meaning American workers’ real incomes have now been squeezed for five consecutive months.

September’s wage growth is “the lowest since May 2021,” Long said. “Inflation has wiped out wage gains since March. That’s a real financial squeeze.”

The mixed signals extend to the broader labor market. Layoffs data from outplacement firm Challenger, Gray & Christmas showed job cuts falling sharply in 2026 — down 40% from a year earlier and at a four-year low. Combined with the slow hiring pace, economists describe the current environment as a “low-hire, low-fire” market in which workers are staying put rather than seeking new opportunities.

“The job market is kind of treading water,” said Ted Rossman, a principal consumer finance analyst at Money Management International, per NBC15. “People are job hugging a lot more than job hopping.”

The Fed’s Dilemma

The report arrived at a delicate moment for monetary policy. In September, the Federal Reserve raised its benchmark interest rate by a quarter point to a target range of 3.75%–4% — its first hike since 2023 — as Chairman Kevin Warsh warned that inflation had been “too high and has been for too long,” CNBC reported. Updated projections released after that meeting showed 16 of 18 officials expected at least one more hike this year.

But the weak September payrolls number has shifted the calculus ahead of the Fed’s late-October meeting. Traders slashed the odds of another hike to roughly 20%, down from 64% a week earlier, according to CME FedWatch data cited by multiple outlets.

“For the Fed, these numbers do not make a case for a rate increase in October,” said Ken Mahoney, CEO of Mahoney Asset Management. “A hike would have to come from the inflation data, not from a labor market that produced 29,000 jobs against a 90,000 estimate and then subtracted 60,000 from the prior two months.”

Others were less certain. Nancy Vanden Houten, lead U.S. economist at Oxford Economics, argued that “the softer than expected September employment report makes a rate hike at the October meeting a closer call,” though she still expected the Fed to raise rates. Seema Shah, chief global strategist at Principal Asset Management, took the opposite view, saying the report “should put an October Fed hike firmly on the back foot.”

Nic Puckrin, a former Goldman Sachs analyst, framed the choice starkly: hiking again risks tipping the scales on unemployment “at a time when Americans are already struggling with the cost-of-living crisis,” while holding risks letting inflation run.

Markets Rally on Rate Relief

Financial markets treated the weak report as good news. The Nasdaq Composite closed at an all-time high, gaining 1.6%, while the S&P 500 rose about 1%. The 10-year Treasury yield fell roughly 6 basis points as bond prices rose, and the dollar weakened.

“There’s been a ripple of relief on financial markets as hopes rise that the Fed won’t have to go so hard and fast in raising interest rates,” said Susannah Streeter, chief investment strategist at Wealth Club. “The figures suggest the jobs engine is losing a little steam, but isn’t spluttering to a halt.”

A Political Flashpoint Before the Midterms

With just weeks to go before the November midterm elections, the report feeds directly into the central campaign debate over the economy and affordability. Rising mortgage rates — the average 30-year fixed rate reached 7.28%, its highest in nearly three years — and elevated energy prices tied to the war with Iran have stretched household budgets.

Unemployment also rose more sharply for Black Americans, climbing a full percentage point to 7% — double the rate for white workers, according to the Guardian.

Some analysts cautioned against reading too much into a single month. A 17,000 drop in government payrolls accounted for much of the weakness, and Capital Economics’ Bradley Saunders noted the reading was “not disastrous” even if it fell well short of expectations. He also linked softer healthcare hiring to the administration’s decision to rescind work authorization for roughly 350,000 migrants.

Others pointed to the longer trend as the more meaningful signal. September’s gain represented a sharp slowdown from August’s originally reported 162,000 — now revised to 133,000 — and far below the roughly 10,000-jobs-a-month average that defined the prior year.

What’s Next

The next major test comes on October 14, when September inflation data is released. That report is likely to weigh more heavily on the Fed’s decision than the jobs number, given that inflation, not employment, remains the central bank’s overriding concern.

The Fed’s next policy meeting is scheduled for late October, followed by the midterm elections in early November. Whether the labor market is merely cooling — or beginning to stall — is the question that will shape both.