September Jobs Miss Drives Yields Lower, Rate-Hike Bets Fade as Payrolls Rise Just 29,000

The U.S. labor market hit a soft patch in September, with nonfarm payrolls rising just 29,000, the Labor Department reported Friday, well short of the 90,000 consensus forecast. The unemployment rate ticked up to 4.2% from 4.1%, and prior months were revised sharply lower.

The report, the final official employment snapshot before the Nov. 3 midterm elections, showed hiring slowing from a downwardly revised 133,000 in August. July’s gain was revised to a loss of 10,000 jobs from an initially reported gain of 21,000. Combined, July and August were revised down by 60,000.

Average hourly earnings rose 0.1% month over month, below the 0.3% expected, pulling the annual wage growth rate to 3.0% — the lowest since May 2021, according to the Labor Department.

**Markets react immediately**

Treasury yields fell sharply after the release. The 10-year yield dropped to 5.16% from 5.22% early Friday, later settling around 5.21%, still near multi-year highs. Stock futures turned higher, with S&P 500 futures up 0.4% and Nasdaq 100 futures gaining 0.8% as traders interpreted the weak data as reducing pressure on the Federal Reserve to raise rates further.

“Today’s report may revive the ‘bad news is good news’ narrative, but hoping for a weaker labor market just to secure easier financial conditions is a poor tradeoff,” Bret Kenwell, U.S. investment analyst at eToro, said in a note cited by CNN. “Lower rates may support markets in the near term, but a meaningful deterioration in hiring and income would eventually weigh on consumer spending and economic growth.”

**Underlying details show fragility**

The employment gains were narrowly concentrated. Health care added 17,000 jobs, well below its average monthly gain of 33,000 over the prior 12 months, according to the Labor Department data cited by Zero Hedge. Construction added 11,000, with nonresidential specialty trade contractors up 12,000. Manufacturing added 9,000, extending a four-month streak.

Financial activities lost 7,000 jobs, with the sector down 129,000 since a peak in May 2025. Temporary help services, often a leading indicator, fell by 10,900 jobs, which “may signal weakening demand for hiring in the coming months,” ZipRecruiter economist Nicole Bachaud wrote in a note reported by CNN.

The unemployment rate rose partly because 485,000 people entered the labor force. The labor force participation rate edged up to 61.8%. The number of unemployed workers rose by 78,000 to 7.1 million. Long-term unemployed — those jobless for 27 weeks or more — held steady at 1.9 million.

The Black unemployment rate jumped to 7.0% in September, according to Zero Hedge’s analysis of the data. Jobless rates for other major groups showed little change.

**Consumer strain persists**

Wage growth is being eroded by inflation. “Americans are frustrated by the lack of opportunities right now,” Heather Long, chief economist at Navy Federal Credit Union, wrote in a note reported by CNN. “Wage growth fell to a new 5-year low and is being wiped out entirely by inflation. That stings heading into the holidays.”

A survey cited by The Independent reported that 82% of Americans disapprove of President Donald Trump’s handling of inflation. Consumer and employee confidence indexes have dropped to historical lows, according to that report.

**Fed outlook shifts**

The weak jobs data led traders to reduce expectations for a rate hike at the Federal Reserve’s meeting later this month. Zero Hedge, citing the report’s downward revisions, said “had the Fed known this, it most likely would not have hiked last month.” Fed officials have been divided, with Dallas Fed President Lorie Logan calling for more hikes while others urge patience, as noted in Zero Hedge’s pre-report coverage.

The report also showed the household survey recorded a 406,000 surge in employed workers, the second highest since January, which helped push the employment-population ratio to 59.2%.

**Sector-level details**

In retail and fashion, department stores shed 700 jobs to employ 947,100 in September, while apparel specialty stores added 600 positions for a total of 1.15 million, according to WWD’s review of the Labor Department data.

Part-time employment for economic reasons — workers who would prefer full-time work but cannot find it — was little changed at 4.5 million. The number of people not in the labor force who want a job stood at 5.8 million.

The average workweek for all private employees held at 34.4 hours.

Economists described the environment as a “low-hire, low-fire” labor market undergoing structural shifts from an aging population, declining immigration, and the advance of artificial intelligence, according to CNN. Through September, the economy has added an average of 68,000 jobs per month this year.

“We are just seeing the labor market holding up,” Kory Kantenga, chief economist at LinkedIn, told CNN.