US nonfarm payrolls increased by 29,000 in September per BLS data
US nonfarm payrolls increased by just 29,000 jobs in September while the unemployment rate rose to 4.2%, according to data released Friday by the Labor Department’s Bureau of Labor Statistics. The sharp slowdown in hiring and downward revisions to prior months led financial markets to scale back expectations for further Federal Reserve interest rate hikes.
Bureau of Labor Statistics Reports 29,000 New Jobs
The economy added significantly fewer positions than the 90,000 jobs economists polled by Reuters had expected. September’s employment gains followed a downwardly revised increase of 133,000 jobs in August. Data for July was revised to show the economy shed 10,000 jobs, marking the second time this year that monthly payrolls turned negative.
All told, the economy added 60,000 fewer jobs in July and August than previously estimated. Through September, the economy has added an average of 68,000 jobs per month, which runs well below pre-pandemic averages.
The unemployment rate ticked up from 4.1% in August to 4.2% in September as more people entered or re-entered the labor force. The labor force participation rate moved higher to 61.8% from 61.6% in August, according to the Labor Department.
Healthcare Leads Job Growth as Government Employment Falls
Healthcare accounted for the bulk of September job growth, adding 17,000 positions in ambulatory healthcare services and hospitals. Employment in nursing and residential care facilities dropped by 9,000 positions.
Construction payrolls increased by 11,000, while manufacturers added 9,000 jobs. Financial activities employment dropped by 7,000 positions. Government employment fell by 17,000, temporary help services declined by 11,000, and information services lost 10,000 jobs. Employment in movies and music dipped slightly with 200 jobs shed to 328,500, while broadcasting and content providers fell by 3,000 to 328,100.
Average hourly earnings increased by 5 cents, or 0.1%, in September to $37.81. Over the past 12 months, average hourly earnings rose by 3%, marking the lowest annual wage growth rate since May 2021.
Market Odds for Interest Rate Hike Drop
Financial markets rapidly adjusted expectations for monetary policy following the release. CME Group’s FedWatch tool showed market-implied odds of an interest rate hike at the central bank’s October 27-28 meeting dropped to roughly 13%, down from 22% prior to the report and about 69% a week earlier.
Olu Sonola, head of US economics at Fitch Ratings, noted that this is a disappointing jobs report and a reminder that the low-hire, low-fire labor market never went away.
US stocks opened higher following the report. The S&P 500 gained 0.9%, the Nasdaq surged 1.3%, and the Dow Jones Industrial Average rose 380 points, or 0.75%. The US dollar slipped against a basket of currencies, and US Treasury yields moved lower.
Economic Context Ahead of Midterm Elections
The employment report represents the final official jobs snapshot before the midterm elections on November 3. The figures stand in contrast to statements from President Donald Trump regarding the strength of the economy, presenting challenges for Republicans on the campaign trail. An AP/NORC poll released prior to the data showed 17% of Americans approve of the administration’s handling of cost-of-living issues and 26% approve of the economy overall.
Economists noted that late-September timing for the Labor Day holiday likely contributed to underperforming payrolls, and emphasized that the labor market remains in a low-hire, low-fire state without broad increases in layoffs.