U.S. employers added just 29,000 jobs in September as unemployment rose to 4.2%, prompting investors to reassess the strength of the labor market and the likelihood of another Federal Reserve rate increase.
The Labor Department’s report on October 2 showed payroll growth far below economists’ expectations of roughly 90,000 jobs. The figures for July and August were also revised down by a combined 60,000 positions, weakening the picture of a summer hiring rebound. Health care added 17,000 jobs, while construction gained 11,000 and manufacturing increased by 9,000; financial activities lost 7,000 positions.
Average hourly earnings rose by only 0.1% in September, bringing annual wage growth to 3%, according to the report. The labor-force participation rate improved to 61.8%, suggesting the unemployment-rate increase partly reflected more people entering or remaining in the workforce. Treasury yields initially moved lower after the release as traders reduced expectations for an October Fed hike, although yields later recovered during the session.
Economists said the data pointed to a cooling, low-hiring labor market rather than an abrupt collapse, leaving inflation as a key factor in future Fed decisions.