U.S. Added Just 29,000 Jobs in September as Unemployment Rose to 4.2%

WASHINGTON - U.S. employers added just 29,000 jobs in September as the unemployment rate increased to 4.2%, according to federal labor data released Friday morning, marking a sharp slowdown in hiring and coming in well below economists' expectations.

The Bureau of Labor Statistics said total nonfarm payroll employment changed little during the month and that employment in every major industry also showed little change.

Economists surveyed by Reuters had expected approximately 90,000 jobs to be added.

The September increase was also substantially weaker than August, when employers added a downwardly revised 133,000 jobs.

August had originally been reported as a gain of 162,000.

The revisions extended beyond August.

July payroll growth was revised down by 31,000 jobs, changing the estimate from a gain of 21,000 to a loss of 10,000 jobs.

August was revised down by 29,000.

Together, the July and August revisions reduced previously reported employment growth by 60,000 jobs.

September's 29,000 increase was also below the average monthly gain of 45,000 over the previous 12 months, according to the Bureau of Labor Statistics.

Unemployment rises to 4.2%

The unemployment rate increased from 4.1% in August to 4.2% in September.

Approximately 7.1 million people were unemployed, according to the federal household survey.

The unemployment rate has remained within a relatively narrow range of 4.1% to 4.3% since March.

The labor force participation rate was 61.8% in September and the employment-population ratio was 59.2%.

Both measures changed little during the month and have shown little net movement since January.

Approximately 1.9 million people had been unemployed for 27 weeks or longer.

Long-term unemployed workers represented 27.1% of all unemployed people.

Another 4.5 million people were working part time for economic reasons, meaning they wanted full-time employment but were unable to obtain it or had experienced reduced hours.

The number of people outside the labor force who wanted a job was approximately 5.8 million.

Hiring weakness spread across industries

No major industry posted a statistically significant employment change during September, according to the Labor Department.

Health care continued to trend higher, adding 17,000 jobs.

Ambulatory health care services added approximately 13,000 jobs and hospitals added approximately 12,000, while nursing and residential care facilities lost about 9,000.

Health care's September increase was significantly slower than its average gain of 33,000 jobs per month over the previous year.

Construction employment increased by approximately 11,000, which the BLS characterized as little changed.

Nonresidential specialty trade contractors continued to trend higher with a gain of about 12,000 jobs.

Manufacturing added approximately 9,000 jobs and has gained 72,000 positions since a recent low in December 2025.

Plastics and rubber product manufacturing and machinery manufacturing each added approximately 5,000 jobs.

Financial activities lost approximately 7,000 positions during September.

Employment in that sector has declined by about 129,000 since a recent peak in May 2025, with roughly 90,000 of those losses occurring among insurance carriers and related businesses.

Other major sectors, including retail trade, transportation and warehousing, information, professional and business services, leisure and hospitality and government, showed little change.

Wage growth also cooled

Average hourly earnings for private-sector workers increased by 5 cents in September to $37.81.

That represented a monthly increase of only 0.1%.

Average hourly earnings were 3.0% higher than one year earlier.

For private-sector production and nonsupervisory employees, hourly earnings increased by 7 cents, or 0.2%, to $32.60.

The average private-sector workweek remained unchanged at 34.4 hours.

The manufacturing workweek remained at 40.6 hours, while factory overtime held at 3.0 hours.

Possible Labor Day distortion

Economists cautioned against interpreting the 29,000 headline number as definitive evidence of a sudden labor-market collapse.

Reuters reported that seasonal adjustment effects associated with the timing of Labor Day may have depressed the September payroll estimate.

Labor Day occurred relatively late in the survey calendar this year, a pattern that economists say has historically been associated with weaker reported September employment growth.

The same seasonal effects may also have contributed to August's initially strong reading and subsequent downward revision.

The monthly employment report is subject to revision as additional employer responses are received and seasonal factors are recalculated.

September's figure could therefore be revised in future reports.

Layoffs remain historically low

Other labor-market indicators continue to show relatively limited job losses.

Initial applications for unemployment benefits have recently hovered near their lowest levels in decades.

Weekly claims fell to 197,000 in the latest report, near a 57-year low.

That combination of weak hiring and limited layoffs has led economists to describe the current environment as a low-hire, low-fire labor market.

Workers who already have jobs have generally experienced relatively strong job security, while people seeking new employment have faced a more difficult hiring environment.

The number of available job openings has also declined from the unusually high levels recorded during the post-pandemic labor shortage.

The latest data therefore point more clearly to weak hiring than to a broad surge in layoffs.

How much job growth does the economy need?

The number of jobs needed each month to keep unemployment stable has declined as growth in the available workforce has slowed.

Reuters reported that economists now estimate the economy may need approximately 50,000 to 80,000 additional jobs per month to keep pace with growth in the working-age population.

That threshold is considerably lower than estimates from earlier years.

Retirements and reduced immigration have both contributed to slower labor-force growth.

September's increase of 29,000 jobs falls below even that lower estimated range.

Federal Reserve implications

The employment report immediately affected expectations for Federal Reserve interest-rate policy.

The Federal Reserve raised its benchmark rate by a quarter percentage point in September to a range of 3.75% to 4.00%, its first rate increase in three years.

Before Friday's jobs report, investors had already reduced expectations for another increase at the Fed's Oct. 27-28 meeting following cooler inflation data.

The weaker employment report pushed those expectations down further.

Reuters reported that the market-implied probability of an October rate increase fell to approximately 12% shortly after the jobs data were released.

The two-year Treasury yield, which is particularly sensitive to expectations for Federal Reserve policy, fell approximately 7 basis points to 4.716%.

The 10-year Treasury yield fell approximately 6 basis points to 5.176%.

U.S. stock-index futures moved higher following the report, with S&P 500 futures up approximately 0.9% and Nasdaq futures gaining about 1%.

The market reaction reflected expectations that weaker labor demand could reduce pressure on the Federal Reserve to raise borrowing costs again immediately.

The Federal Reserve will still receive additional inflation and economic data before making its October decision.

Inflation remains above the central bank's long-term 2% target, meaning policymakers are balancing continued price pressures against signs of weaker hiring.

Energy and geopolitical risks remain

Economists also continue to monitor the potential labor-market consequences of elevated energy prices and supply disruptions linked to the conflict involving Iran.

Reuters reported that economists expect those pressures, along with tariffs and supply-chain disruptions, could begin having a larger effect on employment later in 2026 and into 2027.

Diesel prices have reached record levels during the current energy disruption, raising costs for transportation, agriculture and other industries.

Businesses facing persistently higher fuel, materials and borrowing costs could eventually respond by slowing hiring or reducing employment.

Those effects are not yet evident in a broad increase in layoffs.

Final jobs report before midterm elections

Friday's employment report is also the final monthly jobs report scheduled before the Nov. 3 midterm elections.

The elections will determine control of Congress.

The report arrives as economic conditions, inflation, energy costs and employment remain prominent subjects in the campaign debate.

The labor data themselves do not determine how voters will respond, but both parties are expected to cite economic indicators as they make competing arguments about the condition of the economy.

The Associated Press reported this week that public confidence in the economy and job availability has weakened despite historically low layoffs.

Friday's report provides new evidence for that debate: unemployment remains comparatively low, but the pace of hiring has slowed substantially.

What the September report shows

The September report presents a labor market with conflicting signals.

Employers added only 29,000 jobs, unemployment increased to 4.2%, wage growth slowed and previous payroll estimates were revised lower.

At the same time, layoffs remain unusually low, the unemployment rate remains within the narrow range seen for much of the year and some economists believe September's unusually weak payroll figure was distorted by seasonal factors.

The October employment report, scheduled for Nov. 6, will provide an important test of whether September represented a temporary statistical slowdown or the beginning of a more sustained weakening in U.S. hiring.