U.S. employers added just 29,000 jobs in September, falling well short of expectations and suggesting that some companies are delaying hiring as they contend with rising energy costs and persistent inflation.
Economists surveyed by financial data firm FactSet had expected payrolls to increase by 90,000 last month. The unemployment rate edged up to 4.2% in September from 4.1% in August.
Cooler hiring in July and August
The latest figures indicate that the labor market has improved from last year, when employers added an average of only 10,000 jobs per month. Still, September’s report raises concerns that hiring is losing momentum following a strong August and the Federal Reserve’s first interest-rate increase in three years.
“September’s nonfarm payroll gain of just 29,000 jobs raises questions about the durability of the labor market after the Federal Reserve’s first interest rate increase since 2023,” Jerry Templeman, vice president of economic and fixed-income research at Mutual of America, said in an email.
Job creation was subdued across much of the economy. Healthcare, which has been a leading source of employment growth this year, added only 17,000 positions, while financial services companies cut 7,000 jobs in September.
“Only healthcare and construction were hiring, and it was weak,” said Heather Long, chief economist at Navy Federal Credit Union. She added that many Americans are discouraged by the limited number of openings. “Across America, people don’t like this labor market. It’s not hard to see why. There’s still not much hiring going on.”
The Labor Department also revised payroll gains for July and August downward by a combined 60,000 jobs. Those revisions put August’s apparent rebound in context, said Steve Rick, chief economist at financial services company TruStage. “One month doesn’t make a trend, and monthly payroll numbers can bounce around quite a bit. What matters more is whether the three-month trend continues to show a labor market that is gradually cooling rather than falling off a cliff,” he said in an email.
Economists are also tracking other indicators of labor-market health, including wage growth, which has trailed inflation for five straight months. Wages increased at an annual rate of 3% in September, below the 3.4% annual inflation rate recorded in August by the Consumer Price Index. The September CPI report is scheduled for release on Oct. 14.
September’s wage growth was “the lowest since May 2021,” Long said. “Inflation has wiped out wage gains since March. That’s a real financial squeeze.”
A report released Thursday by outplacement firm Challenger, Gray & Christmas found that job cuts have fallen sharply in 2026. Employers announced 40% fewer layoffs through September than during the same period a year earlier. Compared with September 2025, layoffs fell 20% last month, reaching their lowest level in four years.
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What it means for interest rates
The rise in the unemployment rate “warrants close attention,” Templeman said. He warned that increasing joblessness alongside weaker hiring could indicate that further Federal Reserve interest-rate hikes would weigh on economic activity.
Ken Mahoney, CEO of Mahoney Asset Management, said the disappointing September jobs report could lead the Federal Reserve to delay another rate cut at its October meeting.
“For the Fed, these numbers do not make a case for a rate increase in October,” Mahoney said. “A hike would have to come from the inflation data, not from a labor market that produced 29,000 jobs against a 90,000 estimate and then subtracted 60,000 from the prior two months.”
Economists say a resilient labor market would give the Federal Reserve greater flexibility to raise interest rates in the months ahead. The central bank is seeking to bring inflation down to its 2% annual target and last month raised its benchmark interest rate for the first time in more than three years.
U.S. inflation climbed at an annual rate of 3.4% in August, with surging energy prices contributing to the increase in consumer costs.
