U.S. Employers Added Just 29,000 Jobs in September as Unemployment Rises to 4.2%

U.S. employers added only 29,000 jobs in September, far short of the 90,000 that economists surveyed by FactSet had forecast, and the unemployment rate crept up to 4.2% from 4.1% a month earlier. The Labor Department released the figures on Friday, October 2, the last major jobs snapshot before the midterm elections.

The weak month came with a downward revision to the recent past. Combined payroll gains for July and August were cut by 60,000 jobs, which makes the summer look softer than it did when those numbers first came out. September's report also followed a stronger August and landed just after the Federal Reserve raised interest rates for the first time in three years.

Hiring was thin almost everywhere. Healthcare, the brightest spot in the 2026 labor market, added just 17,000 workers, and financial firms shed 7,000 jobs. Only healthcare and construction showed meaningful gains. "Only healthcare and construction were hiring, and it was weak," said Heather Long, chief economist at Navy Federal Credit Union. "Across America, people don't like this labor market. It's not hard to see why. There's still not much hiring going on."

Paychecks are the bigger squeeze. Wages grew at an annual rate of 3% in September, below the 3.4% inflation rate recorded in August, and pay has now lagged prices for five months in a row. Long said it was the slowest wage growth since May 2021. "Inflation has wiped out wage gains since March," she said. "That's a real financial squeeze." Surging energy prices have been a main driver of the inflation.

There was one piece of better news. Data from the outplacement firm Challenger, Gray & Christmas show layoffs have fallen sharply this year. Job cuts through September are down 40% from the same period in 2025, and September's cuts were 20% below September of last year, the lowest level in four years. A year ago employers were adding an average of only 10,000 jobs a month, so the current pace is still an improvement on that.

The numbers complicate the Fed's next move. Jerry Tempelman of Mutual of America said a 29,000-job gain "raises questions about the durability of the labor market after the Federal Reserve's first interest rate increase since 2023." Ken Mahoney, CEO of Mahoney Asset Management, said the report does not make the case for another hike at the Fed's October meeting. "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," he said.

Some economists urged caution about reading too much into a single report. "One month doesn't make a trend, and monthly payroll numbers can bounce around quite a bit," said Steve Rick, chief economist at TruStage. What matters, he said, is whether the three-month trend shows a labor market that is gradually cooling rather than falling off a cliff. The next big data point is the Consumer Price Index report due October 14.