U.S. Employers Add Just 29,000 Jobs in September as Unemployment Rises to 4.2%

Weak hiring and downward revisions make an October Federal Reserve rate increase look unlikely, though markets still expect a hike in December.

U.S. job growth slowed sharply in September, and earlier months were revised lower. The report gives the Federal Reserve more reason to hold rates steady at its next meeting, just weeks after it raised them.

Nonfarm payrolls rose by 29,000 in September, the Labor Department said Friday. Economists polled by Reuters had expected about 90,000. The unemployment rate rose to 4.2% from 4.1%.

Revisions made the picture weaker. August's gain was cut to 133,000 from 162,000, and July flipped from a 21,000 job gain to a loss of 10,000. Together, the two months were revised down by about 60,000 jobs.

Stocks and bonds rose after the report. Interest-rate futures put the odds of a Fed rate increase at the October 27–28 meeting at below 20%, down from more than 25% before the data. The 10-year Treasury yield fell about 6 basis points to roughly 5.18%, and the 2-year yield, which is more sensitive to Fed expectations, fell about 7 basis points to roughly 4.72%.

Traders still see a December increase as likely, at nearly 90% probability, though that was also trimmed. The Fed's next meetings after October's are December 8–9.

Government employment fell by 17,000 jobs. Health care added 17,000, construction 11,000 and manufacturing 9,000. Average hourly earnings rose 3% from a year earlier, the smallest annual gain since May 2021, according to CNN and NPR, and the fourth straight month of slowing wage growth.

The rise in unemployment partly reflects more people looking for work. NPR reported that about 485,000 people joined the labor force in September, and not all found jobs right away.

Reuters reported that seasonal-adjustment quirks probably contributed to both the weak September figure and August's downward revision. Payrolls tend to disappoint when Labor Day falls late in the month, as it did this year. There is also no sign of a broad rise in layoffs. Reuters noted that economists estimate the economy needs only 50,000 to 80,000 new jobs a month to keep pace with growth in the working-age population, so a low headline number does not necessarily mean a sharp deterioration.

The Fed raised its benchmark rate by 25 basis points to 3.75%–4.00% on September 16. The vote was unanimous, and it was the first increase since 2023. Officials cited elevated inflation and signaled another hike was likely by year-end if price pressures persisted and the labor market held up.

September's report complicates that path. It stops short of showing a labor market in decline, but it gives policymakers a reason to wait. The next jobs and inflation reports will show whether September was a temporary statistical dip or the start of a broader slowdown.

The report also comes as investors continue to watch how changing economic conditions affect major growth industries and technology companies.

Sources: U.S. Bureau of Labor Statistics (Employment Situation, September 2026); Reuters; CNBC; CNN; NPR; Federal Reserve September 2026 policy decision.

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