U.S. employers added 29,000 jobs in September, far below economist forecasts

The U.S. labor market cooled sharply in September, with employers adding just 29,000 jobs against forecasts for 84,000, while the unemployment rate climbed to 4.2%. The miss, compounded by steep downward revisions to July and August payrolls, has reshaped trader expectations for the Federal Reserve’s next move.

• Nonfarm payrolls rose 29,000 in September, far below the 84,000 gain economists surveyed by Dow Jones had expected.
• July and August payrolls were revised down by a combined 60,000 jobs, with July flipping from a gain to a loss of 10,000.
• Average hourly earnings rose just 0.1% in September, putting 12-month wage growth at 3.0%, its slowest pace since May 2021.

• 29,000 September payroll gain versus the 84,000 economists forecast
• 4.2% unemployment rate versus the 4.1% Wall Street expected
• 82.8% odds the Fed holds rates steady on October 27-28, per CME FedWatch
• 3.0% 12-month wage growth, the lowest reading since May 2021

The Bureau of Labor Statistics said in its Employment Situation report released Friday, October 2, 2026, that both nonfarm payrolls and the jobless rate “changed little” in September, even as the headline numbers fell well short of what markets had priced in. Economists polled by Dow Jones had projected 84,000 new jobs and an unemployment rate of 4.1%, according to reporting by CNBC. The number of unemployed Americans stood at 7.1 million, and long-term unemployment, those jobless 27 weeks or longer, held at 1.9 million, or 27.1% of all unemployed people.

Revisions wipe out 60,000 jobs from prior two months

The BLS report did more damage below the headline. August’s initial gain of 162,000 was cut to 133,000, and July’s previously reported 21,000 increase was revised into a loss of 10,000. Combined, the two months now show 60,000 fewer jobs than the government had previously reported.

Thomas Simons, chief U.S. economist at Jefferies, called the data decisive for the Fed’s next decision.

“For the Fed, this number should be the nail in the coffin for an October hike,” Simons wrote in a note, adding that August’s rebound “was nothing more than a rebound from very weak hiring in June and July.”

Thomas Simons, chief U.S. economist at Jefferies

Hiring was concentrated in a narrow set of industries. Health care added 17,000 jobs, slower than its average monthly gain of 33,000 over the prior year, while construction rose 11,000 and manufacturing added 9,000, now up 72,000 since a December 2025 low. Government employment fell 17,000, temporary help services dropped 11,000, information services lost 10,000 amid continuing concern over artificial intelligence’s effect on staffing, and financial activities shed 7,000 jobs, extending a decline of 129,000 since a May 2025 peak.

Fed hold odds jump to 82.8% ahead of October 27-28 meeting

Markets moved quickly on the release. Stock futures rose and Treasury yields slumped, reversing a recent climb to levels not seen since the early part of the century.

The CME Group’s FedWatch tool showed market-implied odds of the Federal Open Market Committee holding rates steady at its October 27-28 meeting jumping to 82.8%. That follows the FOMC’s quarter-point rate increase in September, with policymakers now widely expected to wait until December before considering another move. Fed officials watch the unemployment rate more closely than the payrolls headline, and the household survey behind that rate told a stronger story than the establishment survey: household employment rose 406,000, the labor force grew 485,000, and the participation rate climbed 0.2 percentage point to 61.8%, its highest level since May.

A broader measure of labor underutilization, which includes discouraged workers and those holding part-time jobs for economic reasons, fell to 7.6%, its lowest since January 2025. Inflation remains the more persistent concern for policymakers: the Fed’s preferred gauge most recently showed core inflation running at a 3% annual rate, above the central bank’s 2% target even as wage growth slows.

Wage growth slows to five-year low as GDP tracking stays strong

Average hourly earnings rose just 5 cents, or 0.1%, to $37.81 in September, against Wall Street’s forecast of 0.3%. The 12-month gain of 3.0% is the smallest since May 2021, well below the 3.1% economists had expected. The average workweek held steady at 34.6 hours.

Heather Long, chief economist at Navy Federal Credit Union, said wage growth is now losing ground to prices.

“Americans are frustrated by the lack of opportunities right now,” Long said, adding that “wage growth fell to a new 5-year low and is being wiped out entirely by inflation. That stings heading into the holidays.” Long nonetheless described the labor market as “stable” and said she does not expect the soft report to deter the Fed from a December hike. The weakness in hiring contrasts with stronger output data: the Commerce Department this week revised first-quarter GDP growth to 2.5% and second-quarter growth to 2.2%, while the Atlanta Fed’s tracking estimate puts third-quarter growth at 3.7%.

The BlockWest read. A labor market this soft, paired with 82.8% odds of an October hold, gives risk assets a near-term tailwind that crypto treasuries and leveraged allocators will likely lean into before December. The real test is whether Jefferies’ Simons and Navy Federal’s Long converge by then: if wage disinflation persists alongside 3% core inflation, the Fed faces a harder call than this report’s market reaction suggests.

The BLS is scheduled to publish the October 2026 Employment Situation report on November 6, 2026, which will show whether September’s weakness was a one-month aberration or the start of a trend heading into the Fed’s December decision.

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