U.S. Payrolls Rise Just 29,000 in September as Unemployment Climbs to 4.2% and Prior Months Lose 60,000 Jobs

The U.S. labor market cooled sharply in September, with nonfarm payrolls increasing by a seasonally adjusted 29,000 while the unemployment rate rose to 4.2%, the Bureau of Labor Statistics reported Friday, according to CNBC. The reading landed far below the 84,000 gain and 4.1% jobless rate that economists surveyed by Dow Jones had expected, and also missed the 90,000 consensus tracked by Trading Economics and the 98,000 benchmark compiled separately by dca-calculator.com.

Revisions Erase a Combined 60,000 Jobs

Compounding the weak headline figure, the BLS revised down the two prior months. July, originally reported as a gain, now shows a loss of 10,000 jobs, a 31,000 downward revision, while August was lowered to a gain of 133,000, a 29,000 cut, according to CNBC and Trading Economics. Together, July and August payroll counts are now 60,000 lower than previously reported. Ahead of the release, KPMG had forecast a September gain of 95,000, built on an August figure of 162,000 that has since been revised away, underscoring how quickly the data trail shifted in the span of one report, per KPMG.

Wages Slow, Household Survey Diverges

Average hourly earnings rose just 0.1% on the month, putting the 12-month gain at 3%, the lowest annual rate since May 2021, CNBC reported. Wall Street had been looking for a 0.3% monthly increase and a 3.1% annual pace. The labor force participation rate rose 0.2 percentage point to 61.8%, its highest level since May, while an alternative, broader measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons edged down to 7.6%, its lowest since January 2025, according to CNBC's reporting on the household survey.

That household survey painted a notably different picture than the establishment count: household employment rose by 406,000 and the labor force expanded by 485,000, per CNBC. KPMG, citing Indeed research, has attributed part of the gap between slowing payroll growth and a steady unemployment rate to a shrinking labor force, estimating it has contracted by roughly 700,000 workers so far in 2026 as foreign-born participation declines and the workforce ages. KPMG describes the result as a "low-hire, low-fire" labor market, a dynamic in which hiring slows without necessarily driving unemployment sharply higher, and CNBC reported that the data have painted a similar low-hire, low-fire picture. Indeed Hiring Lab, for its part, characterized the market as largely stable for workers who already hold jobs because layoffs are low, but said that "for those looking for work, the squeeze is real," adding that whipsawing official data from the past two BLS reports do not change that broad narrative.

Health Care and Construction Carry the Gains

Sector detail reported by CNBC showed health care adding 17,000 jobs, the largest single contributor, with construction up 11,000 and manufacturing up 9,000. On the losing side, government employment fell 17,000, temporary help services dropped 11,000, information services lost 10,000 amid what CNBC described as worries over artificial intelligence's effect on the jobs picture, and financial activities shed 7,000. Trading Economics data corroborate those figures closely (health care +16.7K, construction +11K, manufacturing +9K, government -17K, information -10K, financial activities -7K) and add further context: leisure and hospitality rose just 10,000 in September after a 37,000 gain in August, and overall private payrolls rose only 46,000 versus 89,000 the prior month. Taken together, those component readings support an interpretation that the slowdown was broad rather than confined to one or two industries, since both goods- and services-side categories decelerated at the same time.

Markets Reprice the Fed

The data immediately shifted interest-rate expectations. Market-implied odds that the Federal Reserve holds rates steady at its October 27-28 meeting jumped to 82.8%, according to CME Group's FedWatch tool as cited by CNBC, with traders recalibrating to expect the rate-setting Federal Open Market Committee to hold off until December for its next hike. The FOMC raised its benchmark rate a quarter percentage point in September. CNBC also reported that stock futures rose sharply after the release while Treasury yields slumped, following a recent climb to levels not seen since the early part of the century.

Economists Weigh In

"For the Fed, this number should be the nail in the coffin for an October hike," Thomas Simons, chief U.S. economist at Jefferies, said in a note cited by CNBC, adding that "it now appears that the August number was nothing more than a rebound from very weak hiring in June and July." Heather Long, chief economist at Navy Federal Credit Union, told CNBC that "wage growth fell to a new 5-year low and is being wiped out entirely by inflation," yet still described the labor market as "stable" and said she does not think the Fed will be dissuaded from hiking in December. CNBC reported that policymakers have largely seen inflation as a larger threat to the economy than the labor market, with the most recent reading of the central bank's preferred gauge showing core inflation at a 3% annual rate, well above the Fed's 2% target, while output data have held firmer: the Commerce Department revised first- and second-quarter GDP growth to 2.5% and 2.2%, respectively, and the Atlanta Fed is tracking third-quarter growth at 3.7%. Bottom line, on the evidence available: September's 29,000 gain plus 60,000 in downward revisions show hiring running at a fraction of its earlier pace, but with core inflation at 3% and GDP tracking at 3.7%, the available commentary and market pricing point to further tightening being deferred toward December rather than abandoned — an interpretation, not a forecast.