US Job Growth Falls Short of Forecasts as Firms Remain Cautious

The US added fewer jobs than expected in September and wage growth slowed, signaling some caution among employers amid rising costs.

Nonfarm payrolls increased 29,000 last month after a downward revision to the prior two months, according to Bureau of Labor Statistics data out Friday. That missed all estimates in a Bloomberg survey of economists. The unemployment rate rose to 4.2%, partly reflecting a growing workforce.

Robust consumer spending and vigorous business investment has supported hiring, but many cost-conscious employers have taken a measured approach to expanding headcount. That’s led to uneven hiring from month to month. Even so, layoffs remain subdued, pointing to a relatively stable job market.

With unemployment still historically low, Federal Reserve officials can keep their attention focused on inflation as they consider when to raise interest rates again. Traders pared bets on a Fed rate hike this month following the data.

“For the Fed, this number should be the nail in the coffin for an October hike,” Thomas Simons, chief US economist at Jefferies LLC, said in a note. “It now looks more likely that the policymakers emphasizing that they have some more time before another hike is needed will remain patient.”

The S&P 500 stock index rose following the release. Treasury yields were lower and the dollar declined.

The latest jobs report is the last before the November midterm elections, in which the economy is expected to play a central role in how Americans vote. While the labor market is part of that picture, much of the focus has been on lingering concerns about the cost of living, even as consumers continue to spend.

Industry Breakdown

Payrolls declined in local government, as well as in some of the industries most exposed to artificial intelligence, like information, professional and business services, and financial activities. Investment in data centers and other AI-related infrastructure helped support additional hiring in construction and manufacturing.

Healthcare and leisure and hospitality employment also increased. Meantime, average hourly earnings edged up a weaker-than-expected 0.1% from August and rose 3% compared with a year earlier — the slowest annual wage growth since 2021. Average weekly hours were unchanged.

“The labor market is solid, but one thing it’s not doing is generating inflation,” said Michael Pearce, chief US economist at Oxford Economics.

What Bloomberg Economics Says...“September payrolls indicate hiring slowed after August’s blowout print. Along with the uptick in the unemployment rate, this report doesn’t build a case for an October rate hike. We expect for the Fed to stay on hold for the rest of the year.”— Anna Wong, Andrew Sacher and Eliza WingerTo read the full note, click here.

The jobs report is composed of two surveys — one of businesses, which produces the payrolls figures, and another of households, which informs unemployment and participation statistics. The household survey also has its own measure of employment, which surged in the month.

The participation rate — the share of the population that is working or actively looking for work — rose to a four-month high of 61.8% in September. A broad measure of unemployment that includes discouraged workers and those employed part-time for economic reasons ticked down to the lowest since January 2025.

Black unemployment rate climbed to 7%, in part driven by a pickup in participationMedian duration of unemployment climbed to a four-month high of 11.5 weeksThe diffusion index, which measures the breadth of job growth, dropped to the lowest level since October

The steadiness of the labor market has its drawbacks, though. In some cases, the lack of churn has left workers feeling stuck in jobs they dislike. It’s also made it harder for those who lose work to find another position. That may explain why many Americans are pessimistic about the job market, with fewer saying jobs are plentiful and more saying work is hard to find.

“What strikes me is how stable it’s been for more than a year now,” said Richard Moody, chief economist for Regions Financial Corp. “A low-hire, low-fire narrative is still in place.”