US Economy Added Just 29,000 Jobs in September, Labor Dept Says

US employers added just 29,000 jobs in September, roughly one-third of expectations, according to Labor Department data released Friday — the final jobs report before the midterm elections and one of the weakest monthly prints of this cycle.

The unemployment rate rose to 4.2% from 4.1% in August. Revisions deepened the picture of a softening market: the department cut August's job gains by 29,000 to 133,000, and combined with July's downward revision, the economy created 60,000 fewer jobs over the two months than previously reported.

For individual workers, the report signals a market where the balance of power has shifted toward employers. Wage growth fell short of expectations: average hourly earnings rose five cents, or 0.1%, over the month and 3% over 12 months — below the Commerce Department's latest 12-month inflation reading of 3.4%. In practical terms, the average paycheck is losing ground to prices.

"The job market is kind of treading water, if you will. I mean, it's very much a low-hire, low-fire job market. People are job hugging a lot more than job hopping," said Ted Rossman, a principal consumer finance analyst at Money Management International.

Slow wage growth points to weak competition among employers for staff, Rossman said. "I think that does show that the employer has the upper hand," he said. "I do think another take on this is that some employers may be trying to hold the line on wage increases, so as not to have to pass along more price increases to their customers."

The data immediately reshaped expectations for monetary policy. Odds of the Federal Reserve raising interest rates at its meeting at the end of the month declined within hours of the release, according to CME FedWatch. A cooling job market may undermine the Fed's confidence that the economy can withstand another rate hike in its fight against inflation. Last month, the Fed voted unanimously to raise rates by a quarter point.

Fed officials were divided even before Friday's numbers. On Thursday, Dallas Fed President and CEO Lorie Logan called for tighter monetary policy. "The FOMC took an important first step at our September meeting by raising the target range for the federal funds rate 25 basis points. Still, I currently estimate the target range needs to rise an additional 50 basis points or more to appropriately balance the outlook and risks for our dual mandate goals," Logan said.

Fed Vice Chair for Supervision Michelle Bowman took the opposite view. "What we need to have is a better understanding of how the underlying trends in the economy and how financial conditions are evolving going forward. So I don't currently see an urgent need for further action and I think we need to better understand the totality of the data," Bowman said.

Whatever the Fed decides will ripple through household borrowing costs that are already straining budgets. This week, 10-year Treasury yields hit a 24-year high, and the average 30-year fixed-rate mortgage reached 7.28% on Thursday, according to Freddie Mac — the highest in nearly three years.

Rossman said his organization's credit counseling operation is seeing the strain directly. "More people are coming to us with more debt, because even if they're working and even if they get a raise, it's just not enough. We've seen over the past seven years our average clients income has gone up 44%. Their average debt load has gone up 55%. That sort of thing is happening across the economy," he said.

With hiring at 29,000, revisions negative, and wage growth trailing inflation, the September report gives workers and job seekers little leverage heading into the final months of the year — and markets will be watching whether the Fed's next move compounds or relieves that pressure.