US September jobs report shows unemployment rate at 4.2%
US job growth slowed sharply to 29,000 in September while the unemployment rate rose to 4.2%.
US employers added far fewer jobs than expected in September, with unemployment rising and significant downward revisions to prior months. The US Bureau of Labor Statistics reported seasonally adjusted nonfarm payrolls increased by only 29,000, while the unemployment rate ticked up to 4.2%. Economists had forecast a gain of 84,000 jobs and a steady 4.1% unemployment rate. Revisions showed 60,000 fewer jobs existed in prior months than first thought, with July's payrolls now showing a loss of 10,000 and August's gain revised down to 133,000.
Labor force participation and broader unemployment trends
Despite the weak headline job number, more people entered the labor force. The labor force increased by 485,000 in September, pushing the participation rate up 0.2 percentage points to 61.8%, its highest level since May. The broadest measure of unemployment, which includes discouraged workers and those working part-time for economic reasons, edged down to 7.6%. That is its lowest level since January 2025.
Sector-specific job movements
Job gains were concentrated in a few sectors while others contracted. Healthcare drove the limited monthly gains, adding 17,000 positions. Construction and manufacturing also saw modest increases.
| Sector | Job Change (September) |
|---|---|
| Healthcare | +17,000 |
| Construction | +11,000 |
| Manufacturing | +9,000 |
| Government | -17,000 |
| Temporary Help Services | -11,000 |
| Information Services | -10,000 |
| Financial Activities | -7,000 |
Losses were seen in government, temporary help services, and information services-the latter amid worries about artificial intelligence's impact. Financial and professional services also shed jobs.
Wages, hours, and household employment
Wage growth slowed markedly. Average hourly earnings increased just 0.1% in September, putting the 12-month gain at 3%, the lowest since May 2021. The average work week was unchanged at 34.6 hours. A separate survey of households showed a more robust picture, with household employment rising by 406,000 in September.
Market expectations and Fed policy context
The weak report immediately shifted market expectations for monetary policy. Traders increased bets on the Federal Reserve holding rates steady at its late October meeting, with market-implied odds rising to 82.8%. The Fed had raised its benchmark rate by a quarter percentage point in September, its first hike in three years. Policymakers view inflation, with core inflation running at a 3% annual rate, as a larger threat than labor market weakness. Fed officials typically watch the unemployment rate more closely than headline payrolls. Former Fed Governor Kevin Warsh stated the labor market 'is basically running consistent with full employment' but noted that 'inflation is too high and has been for too long'. Most central bank officials had expected at least one more rate hike before year-end. Markets now expect the next rate hike in December, per recent central bank policymaker statements.
