US hiring slows to 29,000 in September as unemployment edges up to 4.2%
US employers added just 29,000 jobs in September, the Bureau of Labor Statistics said in its Employment Situation report published on 2 October, and the unemployment rate rose to 4.2% from 4.1%. The payroll figure fell well short of the roughly 90,000 that economists had expected, according to the data summary compiled by investingLive, and came with downward revisions that took 60,000 off the previously reported totals for July and August.
The revisions reshaped the summer picture. July, first reported as a gain of 21,000, now shows a loss of 10,000 jobs, while August was cut from 162,000 to 133,000. The BLS described September's change as "little changed", its standard phrasing for a result within the survey's margin of error, but the three-month trajectory points to a labour market that has lost momentum since mid-year.
Hiring was concentrated in a narrow set of sectors. Health care added 17,000 positions, led by ambulatory services and hospitals, while construction gained 11,000 and manufacturing 9,000, the latter extending a recovery of 72,000 jobs since a low in December 2025. Against that, government employment fell by 17,000, financial activities shed 7,000, professional and business services lost 9,000 and the information sector dropped 10,000.
Wage pressure continued to ease. Average hourly earnings for private employees rose five cents to $37.81, a 0.1% monthly increase, and were up 3.0% from a year earlier, both below consensus. The participation rate ticked up to 61.8% from 61.6%, and the household survey showed employment rising by 406,000 as the labour force expanded by 485,000, a combination that helps explain why the jobless rate rose despite the gain in people working.
The report landed in a changed policy setting. On 16 September the Federal Open Market Committee voted 12–0 to raise the federal funds target range by a quarter point to 3.75%–4%, its first increase in three years, saying in its statement that "inflation remains elevated" and that the move would "support a timelier return to the Committee's 2 percent goal". The statement characterised job gains at that point as having kept pace with workforce growth, with little change in unemployment.
Markets read the September data as reducing the odds of a quick follow-up. Futures-implied pricing of a hike at the October meeting fell from about 28% to roughly 15% after the release, according to investingLive, while the two-year Treasury yield slipped from 4.78% to 4.72% and the ten-year from 5.23% to 5.17%. Pricing for at least one further increase before year-end remained elevated, however, reflecting inflation gauges that are still well above target.
The tension for policymakers is that the data on prices has not softened in step with hiring. Personal consumption expenditures inflation ran at 3.4% year on year in August, with the core measure at 3.0%, according to figures cited by ROIC, and the energy shock from the Middle East conflict has kept headline measures sticky. The Fed's September statement also pointed to strong productivity and robust capital investment as reasons activity has remained solid.
The next tests arrive quickly. The FOMC meets on 27 and 28 October, with the September consumer price index and third-quarter GDP both due before then, and the BLS has scheduled the October employment report for 6 November at 8:30 a.m. Eastern time.
