U.S. employers added only 29,000 jobs in September as unemployment rose to 4.2%, sharply weakening expectations for a Federal Reserve interest-rate increase in October.
The Labor Department’s report fell well short of economists’ forecasts of roughly 90,000 new positions, highlighting a substantial loss of momentum in hiring. The unemployment rate increased from 4.1% in August, although it has remained within a relatively narrow range of 4.1% to 4.3% since March. Earlier employment figures were also revised lower: July’s gain of 21,000 jobs was changed to a loss of 10,000, while August’s increase was reduced from 162,000 to 133,000.
Health care, construction and manufacturing recorded gains in September, but government and financial-services employment declined. The report suggests employers are hiring cautiously rather than engaging in widespread layoffs, with recent data showing job cuts have fallen compared with last year. Investors responded by sharply reducing bets on an October rate hike, with futures markets indicating only a small probability of another increase at the Federal Reserve’s October meeting.
Traders still expect policymakers to weigh a possible December move, particularly because inflation remains above the Fed’s 2% target. The weak hiring figures may nevertheless encourage officials to wait for more evidence before tightening policy again.