Hiring stalls at 29,000 jobs in September as unemployment ticks up to 4.2%

The U.S. job market lost more steam in September. Employers added just 29,000 jobs last month, the Bureau of Labor Statistics reported, far below the roughly 84,000 economists had expected. The unemployment rate rose to 4.2% from 4.1% in August, and revisions erased a combined 60,000 jobs from the prior two months, pushing July into negative territory.

The report paints a picture of what economists call a low-hire, low-fire economy. Layoffs remain unusually rare and weekly jobless claims are low, but companies are adding workers slowly, which makes it harder for anyone who is new to the workforce, returning to it, or trying to change jobs.

Where the jobs were, and weren't

Health care, construction and manufacturing accounted for most of September's gains, though even health care, normally a reliable engine, added only 17,000 positions. Financial services and government shed jobs. Federal, state and local payrolls fell by 17,000 combined.

There was one brighter note. The separate household survey showed 485,000 people entering the labor force, lifting the participation rate to 61.8%, its highest since May. Much of the rise in unemployment reflects those new job seekers rather than a wave of firings. A broader measure that includes discouraged and involuntary part-time workers slipped to 7.6%, its lowest since January 2025.

Paychecks are falling behind

Average hourly earnings rose just 0.1% in September and 3% from a year earlier, the slowest annual pace since May 2021. With inflation running hotter than that, many workers are losing buying power. Higher gas and diesel prices tied to the Iran war, tariffs and rising borrowing costs have added to the squeeze.

An uneven picture across communities

The headline numbers hide sharp differences. According to an analysis of BLS data by the Joint Center for Political and Economic Studies, the Black unemployment rate climbed a full percentage point in one month, from 6% to 7%, the highest of any major racial group. The jump was steepest for Black women, whose rate rose from 5.9% to 7.3%, and for young Black workers, from 11.5% to 14.4%.

At the same time, unemployment edged down for white workers, to 3.6%, for Hispanic workers, to 4.7%, and for Asian American workers, to 2.9%. Economists often describe Black workers as an early warning system for the broader labor market because they tend to feel slowdowns first and recover last.

What it means for interest rates

Wall Street largely cheered the soft data. The Federal Reserve raised its benchmark rate by a quarter point in September for the first time this year to fight inflation, and traders had worried about another hike at the Oct. 27-28 meeting. After the report, market-implied odds of the Fed holding steady jumped above 80%. "For the Fed, this number should be the nail in the coffin for an October hike," Jefferies economist Thomas Simons wrote.

Stocks rose and Treasury yields, which recently hit levels not seen since the early 2000s, eased. But many investors still expect at least one more increase before year's end.

For households, the takeaway is mixed: jobs are not disappearing quickly, but finding a new one is getting harder, raises are shrinking, and everyday costs keep climbing. The October report, due in early November, will land just days after the midterm elections.