US Economy Added Just 29,000 Jobs in September, One-Third of Expectations

The US economy added just 29,000 jobs in September, roughly one-third of what economists expected, according to Labor Department data released Friday. It is the weakest print in the final jobs report before the midterm elections and the clearest signal yet that hiring has shifted into low gear.

The unemployment rate ticked up to 4.2% from 4.1% in August. Revisions made the picture worse: 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 two months than previously reported.

What the numbers mean for workers

For anyone job hunting right now, the data points to a market where openings are scarce and leverage has shifted to employers. Ted Rossman, a principal consumer finance analyst at Money Management International, described the dynamic bluntly.

"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," Rossman said.

Wage data reinforces that shift. Average hourly earnings rose five cents, or 0.1%, over the month, and 3% over twelve months. The Commerce Department's latest 12-month inflation reading was 3.4%. In real terms, the average worker's paycheck lost ground in September. Rossman said the gap indicates employers are no longer competing hard for labor.

"I think that does show that the employer has the upper hand," Rossman said. "I do think that 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 Fed calculus

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

Before Friday's data muddied the outlook, Federal Reserve Bank of Dallas President and CEO Lorie Logan had argued for tighter 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 Thursday.

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.

Borrowers feel the squeeze

Whatever the Fed decides will ripple through household finances already under strain. Rossman pointed to data from his organization's non-profit credit counseling operation: over the past seven years, average client income has risen 44%, while average debt loads have climbed 55%.

"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. That sort of thing is happening across the economy," Rossman said.

Credit markets reflected the pressure this week. Ten-year Treasury yields hit a 24-year high. The average 30-year fixed-rate mortgage reached 7.28% on Thursday, according to Freddie Mac, the highest level in nearly three years.

For workers, the combination of 29,000 new jobs, sub-inflation wage growth and rising borrowing costs defines the current market position: staying employed matters more than switching, and negotiating power is thin. The October employment report, due after the Fed's next meeting, will show whether September was a one-month stumble or the start of a sustained slowdown.