The U.S. economy created far fewer jobs than expected in September, pointing to surprising weakness in the labor market and the broader economy. Nonfarm payrolls rose by 29,000 for the month, seasonally adjusted, while the unemployment rate rose 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%. Adding to September’s weakness, August’s jobs count was revised down to reflect a gain of 133,000, while in July it swung from a gain to a loss when payrolls fell by 10,000. The revisions in total showed 60,000 fewer jobs than previously reported. Market reaction to the report was swift, with traders interpreting the weak employment numbers as good news, likely further solidifying the Federal Reserve’s stance at its October meeting. Stock futures rose after the release, while Treasury yields fell after recently rising to levels not seen since the turn of the century. The market-implied odds that the Federal Reserve will keep rates steady at its Oct. 27-28 meeting rose to 83.7%. Federal Reserve officials watch the unemployment rate more closely than the headline payroll numbers. The household survey, which is used to calculate the level of unemployment, was slightly better than the establishment survey, which is used to calculate payroll counts. Household employment rose by 78,000 people over the month, while the labor force increased by 485,000 and the participation rate, which counts those working or actively seeking employment as part 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 who have part-time jobs for economic reasons, fell to 7.6%, its lowest level since January 2025. The report comes with Federal Reserve officials weighing the state of the economy and how it should affect its next interest rate move. Following statements from central bank policymakers in recent days, markets have recalibrated expectations and now expect the rate-setting Federal Open Market Committee to wait until December for its next hike. The FOMC raised benchmark rates by a quarter of a percentage point in September. Inflation is largely seen by authorities as a bigger threat to the economy than the labor market, which has shown resilience in recent months. The data has damaged the outlook for an economy with low hiring and low weekly unemployment claims and an indicator that shows layoffs at their lowest rate in four years. However, inflation has remained well above the Federal Reserve’s 2% target. The latest gauge of the central bank’s preferred gauge showed core inflation at an annual rate of 3%. However, wages continued to show signs of disinflation. Average hourly earnings increased just 0.1% in September, putting the 12-month increase at 3%. Wall Street expected respective readings of 0.3% and 3.1%, the lowest since May 2021. The average work week was unchanged at 34.6 hours. Most of the monthly employment gains came from health care, which added 17,000 workers. Construction increased by 11,000 and manufacturing added 9,000. Government employment fell by 17,000, while temporary help services saw a decline of 11,000 and information services lost 10,000. Financial activities also suffered a drop of 7,000 jobs. This is breaking news. Update to get updates.
