US Payrolls Up Just 29,000 in September, Below Forecasts

US payrolls rose just 29,000 in September, according to the Bureau of Labor Statistics' employment situation report released October 2 — far below the roughly 80,000 economists expected and a sharp slowdown from August's revised 133,000 gain. The print complicates the Federal Reserve's next rate decision, as policymakers weigh whether the labor market is losing momentum.

A seesaw year for hiring

The labor market has swung back and forth all year. After fairly strong job growth last spring, payrolls declined by 10,000 in July, rebounded by 133,000 in August, and then nearly stalled in September. The BLS revised both the July and August figures downward, meaning the underlying trend is weaker than earlier reports suggested.

Sector detail is split. Health care led gains with 17,000 added jobs, followed by construction at 11,000 and manufacturing at 9,000. Finance shed 7,000 positions and professional services lost 9,000. Declines in those two white-collar categories, as economist Harry Holzer notes in Forbes, could reflect a growing influence of artificial intelligence on hiring — a signal worth watching for anyone in finance, consulting, or related knowledge-work roles.

Wage data reinforces the softening picture. Wages rose just 1.6% on an annualized basis in September and 3% over the past year — below the 3.4% inflation rate. For an individual worker, that means real purchasing power is still eroding, and employers face less pressure to bid up salaries in a cooler market.

Participation is the bright spot

The household survey tells a more nuanced story. The unemployment rate ticked up modestly to 4.2% — still historically low — but the increase came from stronger labor force participation, not job losses. The labor force had contracted rapidly earlier in the year, down more than 2 million workers in July versus the previous September. Roughly 1 million workers returned over the past two months. Even so, the labor force remains 1 million smaller than a year ago, reflecting exits by both immigrant and native-born workers.

For job seekers, more people competing for fewer new openings shifts bargaining power toward employers — particularly in the slowing finance and professional services sectors, while health care and construction continue to absorb workers.

The economy behind the numbers

The job market has stayed resilient despite multiple shocks. The war with Iran has pushed oil, gas, and diesel prices substantially higher, and tariffs have added to inflation. Yet second-quarter GDP growth was revised up to 2.2%, indicating an economy holding up under pressure.

There are warning signs. The 10-year Treasury yield now sits near 5.2%, weakening housing demand and durable goods purchases. Consumer sentiment, per University of Michigan survey data, is declining. The economy has leaned on a surge in data-center construction and federal deficit spending above 6% of GDP, while consumers have dipped into savings to sustain spending — a pattern unlikely to last indefinitely.

The Fed's dilemma

Inflation remains above 3%, with core inflation well above the Fed's 2% target, which argues for further tightening. Fed Chair Kevin Warsh had signaled that after September's 25-basis-point hike, another increase before year-end was likely. But softer job growth and weakening consumer sentiment change the calculus: at the Fed's late-October meeting, the probability of another hike has dropped, though a December increase remains a distinct possibility.

The report is also the last one voters will see before the midterm elections. Rising inflation and interest rates have created a difficult economic backdrop for Republicans, though the job market's relative stability remains a talking point the Trump administration has touted.

The next several months of jobs data should clarify whether September's weak print was an outlier or the start of a genuine slowdown.