September 2026 US payrolls add 29,000 jobs as unemployment rises to 4.2%

The U.S. economy added just 29,000 nonfarm jobs in September, the Bureau of Labor Statistics said Friday, far short of forecasts and the clearest sign yet that hiring is stalling. Economists polled by LSEG had expected 90,000, while a Dow Jones survey called for 84,000. The unemployment rate rose to 4.2% from 4.1% in August, above the 4.1% consensus.

Revisions made the picture weaker. July was cut from a gain of 21,000 to a loss of 10,000, and August from 162,000 to 133,000, leaving employment across the two months 60,000 lower than first reported. Private employers added 46,000 jobs against an expected 85,000, government payrolls shrank by 17,000, mostly in state and local education, and manufacturing added 9,000. Average hourly earnings rose 0.1% to $37.81, up 3.0% from a year earlier, according to the BLS. NPR reported that the higher jobless rate was driven largely by 485,000 additional people entering the labor force, which softens the read somewhat.

Markets took the miss as lowering the odds of another Fed hike. CME FedWatch showed the probability of an October hold above 80% after the release, though a December hike was still priced above 75%. Jefferies' Thomas Simons said the number "should be the nail in the coffin for an October hike." The 10-year Treasury yield, which hit a 24-year high near 5.34% on Thursday, fell about 6 basis points to around 5.18%, per CNBC. Stocks rallied at the open, with the Dow up as much as 400 points, though NBC News reported the gains were cut roughly in half by late morning.

What to watch: whether Fed officials, who have been split on the rate path, read September as a one-month soft patch or the start of a trend; the October jobs report; and whether oil near $100 a barrel keeps inflation pressure alive even as hiring cools.