U.S. economy adds 29,000 jobs in September as unemployment rises to 4.2% ahead of midterms

The U.S. economy added just 29,000 jobs in September. The unemployment rate rose to 4.2%. The Bureau of Labor Statistics released the report Friday, making it the final jobs report before the midterm elections on November 3.

The September payroll figure came in roughly a third of what economists expected, handing policymakers and incumbents a weak hand five weeks before the midterms. Dow Jones had forecast 84,000 jobs, while economists polled by Reuters anticipated 90,000; a third reading put expectations just under 70,000. The report capped a week of mixed signals. ADP’s private payroll report on Wednesday showed 90,000 jobs created, while the JOLTS report on Tuesday indicated little change in openings and hires. Downward revisions compounded the softness. August was revised down to 133,000 from an initial 162,000, and July flipped from a gain of 21,000 to a loss of 10,000. Together, the revisions wiped 60,000 jobs from the prior two months.

Sector gains narrow as healthcare slows

Healthcare led September’s gains with 17,000 jobs, but that marked a sharp slowdown from its average of 33,000 per month over the past year. Construction added 11,000 and manufacturing added 9,000. Losses were scattered across white-collar and public-sector categories: financial activities shed 7,000 jobs, government employment fell 17,000, temporary help services declined 11,000, and information services lost 10,000. Most other sectors were largely unchanged, including retail, oil and gas extraction, and leisure and hospitality. George Brown, senior economist at Schroders, said job gains have been a “rollercoaster” this year, though a single soft report is unlikely to point to a lasting collapse. Bradley Saunders, North America economist at Capital Economics, called the figure “not disastrous,” noting that a drop in government roles and temporary visa policy changes weighed on overall growth. Jeffery Roach, chief economist at LPL Financial, said the data showed tension between “goods producing sectors that support the AI boom” and service industries feeling the effect of changes brought about by the tech.

Wages hit five-year low as participation rises

Wages grew 3% year-over-year. It was the slowest annual increase in five years. Average hourly earnings rose just 0.1% in September, well below the 0.3% that Wall Street had expected. The average work week was unchanged at 34.6 hours. The household survey told a different story from the establishment survey used to derive payrolls: household employment rose 406,000 while the labor force swelled by 485,000. The participation rate increased 0.2 percentage point to 61.8%, its highest level since May. A broader unemployment measure, which includes discouraged workers and those holding part-time jobs for economic reasons, edged down to 7.6%, its lowest since January 2025. Unemployment among Black Americans rose a full percentage point to 7%, double the rate for white Americans. Kyle Moore, chief economist at The Century Foundation, said the report shows the labor market grinding to a halt, with slow hiring and declining real wages that leave workers with little bargaining power. “Americans are frustrated by the lack of opportunities right now,” said Heather Long, chief economist at Navy Federal Credit Union. “Wage growth fell to a new 5-year low and is being wiped out entirely by inflation. That stings heading into the holidays.”

Fed likely to hold as October meeting looms

The Federal Reserve’s next policy meeting is scheduled for October 27-28. Markets are pricing in a pause. The CME FedWatch tool put the probability of a hold at 77.3% according to one reading, while another showed 82.8% — a discrepancy that nonetheless points the same way. The Fed raised benchmark rates a quarter percentage point in September, its first hike in three years. Most central bank officials had expected at least one more rate hike before year-end, now more likely at the December meeting. Core inflation, per the Fed’s preferred gauge, is running at a 3% annual rate, above the 2% target. Fed chair Kevin Warsh said the labor market “is basically running consistent with full employment” but that “inflation is too high and has been for too long.” “For the Fed, this number should be the nail in the coffin for an October hike,” said Thomas Simons, chief U.S. economist at Jefferies. He added that the August surge now appears to have been “nothing more than a rebound from very weak hiring in June and July.”

Political pressure mounts ahead of November 3

An AP-NORC poll released Thursday found that 61% of Americans say the economy is worse off than when Trump took office in January 2025. Just 17% approve of his handling of cost-of-living issues, and 26% approve of his handling of the economy overall, both new lows that surpass the lowest marks recorded for Joe Biden during his presidential term. “When businesses are barely hiring and raises aren’t keeping up with rising prices, it’s a stalled economy — and working families are stuck in it,” said Breyon Williams, chief economist for Groundwork Collaborative. The polling stands in sharp contrast to Trump’s public messaging. On Monday, he posted on Truth Social that “The United States has the BEST Employment Numbers in HISTORY.” At a White House event earlier this week, he offered a different assessment: “I’ve done a very bad job of explaining how good the country is doing.”

Markets rally on weak print

Stock futures rose sharply after the release. Treasury yields slumped, having recently climbed to levels not seen since the early part of the century. By midday, the Nasdaq was up 1.5%, the Dow up 0.6%, and the S&P 500 up 1.1%. Gold rose 1.1% to $4,223.49.