The U.S. economy created far fewer jobs than expected in September, reflecting surprising weakness in the job market and the economy as a whole.
Nonfarm payrolls increased by 29,000, seasonally adjusted, for the month, while the unemployment rate increased to 4.2%, the Bureau of Labor Statistics reported Friday. Economists surveyed by Dow Jones expected job growth of 84,000 and an unemployment rate of 4.1%.
In addition to September’s weakness, August’s jobs number was revised down to reflect a gain of 133,000, while July went from a gain to a loss as payrolls fell by 10,000. In total, the revisions showed 60,000 fewer jobs than previously reported.
Market reaction was swift to the report, with traders interpreting the poor jobs numbers as good news, as they likely reinforced the Federal Reserve’s hold at its October meeting. Stock futures jumped after the release, while Treasury yields collapsed after recently hitting levels not seen since the turn of the century.
Fed officials watch the unemployment rate more closely than payroll numbers.
The household survey, used to calculate the level of unemployment, was found to be slightly better than the establishment survey, used to calculate the wage bill.
Household employment increased by 78,000 for the month, while the labor force increased by 485,000 and the participation rate, which takes into account people working or actively seeking work as a share of the total labor force, rose 0.2 percentage points to 61.8%, its highest level since May.
An alternative measure of unemployment, which includes discouraged workers and those in part-time employment for economic reasons, fell slightly to 7.6%, its lowest level since January 2025.
The report comes with Federal Reserve officials assessing the state of the economy and its impact on the next move in interest rates.
Following statements made in recent days by central bank policymakers, markets have recalibrated their expectations and now expect the Federal Rate Setting Committee to wait until December for its next hike. The FOMC raised its policy rates by a quarter of a percentage point in September.
Policymakers widely view inflation as a greater threat to the economy than the labor market, which has shown resilience in recent months. The data paints a picture of an economy with low hiring rates, with low weekly jobless claims and an indicator showing layoffs at their lowest rate in four years.
However, inflation remained well above the Fed’s 2% target. The most recent indicator from the central bank’s preferred gauge showed core inflation at an annual rate of 3%.
Wages, however, continued to show signs of disinflation.
The average hourly wage rose just 0.1% in September, bringing the 12-month gain to 3%. Wall Street expected respective results of 0.3% and 3.1%.
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