Job Growth Slows to 29,000 in September as Wages Cool and Markets Rally

American employers added just 29,000 jobs in September, a sharp slowdown from earlier in the year, while the unemployment rate edged up to 4.2%, the Bureau of Labor Statistics reported Friday. The headline figure landed well below the roughly 84,000 to 90,000 economists had projected and arrived only weeks before voters head to the polls for the midterm elections.

The softer payroll number is the latest sign of a labor market that has cooled without cracking. Beneath the weak headline, the report carried several points of strength that suggest the economy is still expanding, even if hiring has lost momentum.

A Soft Headline Hides a Stronger Household Survey

The monthly payroll count comes from the establishment survey, which samples businesses. A separate household survey, used to calculate the unemployment rate, painted a brighter picture. Household employment rose by 406,000 in September, and the labor force grew by 485,000.

The labor force participation rate climbed 0.2 percentage points to 61.8%, its highest reading since May. A broader measure of joblessness that includes discouraged workers and those stuck in part-time roles for economic reasons fell to 7.6%, its lowest level since January 2025.

In other words, more Americans entered the workforce and found work last month than the headline payroll number alone would suggest. The two surveys can diverge from month to month, and September offered one of the wider gaps in recent memory.

Summer Gains Revised Lower

Revisions to the two prior months subtracted 60,000 jobs from the earlier tallies. August's gain was trimmed to 133,000, and July flipped from a small increase to a loss of 10,000.

Sector data showed the slowdown was broad but not uniform. Health care added 16,700 jobs, led by ambulatory services and hospitals. Construction added 11,000, slightly above its recent monthly average. Manufacturing added 9,000, just shy of expectations.

Government payrolls contracted by 17,000, with most of the losses in state and local education. Financial activities shed 7,000 jobs and remain well below their peak from May 2025, with most of the decline in insurance carriers. Private payrolls grew by 46,000, a slower pace than the previous month.

Wages Cool, Giving the Fed Room to Hold

Average hourly earnings rose just 0.1% for the month, putting the 12-month gain at 3%, the slowest pace since May 2021. That cooling is welcome news for an inflation fight that has kept core price growth near 3%, above the Federal Reserve's 2% target.

Markets welcomed the combination of slower hiring and tamer wages. Stock futures rose and Treasury yields fell as traders bet the Fed will stand pat at its Oct. 27-28 meeting. After the Fed's first rate hike since 2023, officials have signaled they are weighing stubborn inflation against a labor market that had looked resilient, and Friday's report gives them little reason to move again this month.

Market-implied odds of a hold jumped to roughly 83%, according to CME Group's FedWatch tool. Analysts said the report likely removes any near-term case for another increase, leaving the central bank free to wait for clearer data before its final meeting of the year.

Where the Economy Stands Now

Beneath the monthly noise, the picture is one of a low-hire, low-fire labor market. Weekly jobless claims have stayed historically low, and one measure of layoffs sits at a four-year low. The number of long-term unemployed, those jobless for 27 weeks or more, was essentially unchanged at 1.9 million.

The share of Americans working part-time because they could not find full-time work held near 4.5 million. Those figures suggest employers are neither rushing to hire nor cutting deeply, a holding pattern common late in an expansion.

For the White House, the report is a mixed signal in the final stretch before the midterms. The administration has pointed to rising participation, cooling prices and a resilient consumer as evidence its economic agenda is delivering, even as critics seize on the weaker payroll number to argue growth is fading.

What to Watch Next

Attention now turns to the Fed's October meeting and to fresh inflation data due before then. If core inflation keeps easing while job growth stays soft, the case for a pause only strengthens, and the door stays open for a cut later in the year.

Also worth watching is whether the household survey's strength persists. If participation keeps climbing and wage growth stays tame, the September slowdown may look more like a pause than the start of a slide. The next payroll report, and the revisions that come with it, will go a long way toward settling that question.