US Job Growth Slows to 29,000 in September as Unemployment Hits 4.2%

The U.S. labor market slowed in September, adding only 29,000 jobs and missing expectations of 84,000, while the unemployment rate climbed to 4.2%. The data suggests a deceleration in hiring, prompting markets to adjust expectations for upcoming Federal Reserve interest rate policy.

"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.

Downward Revisions and Wage Stagnation

The September figures were accompanied by downward revisions to previous months. According to a CNBC report, July and August payroll figures were revised downward by a combined 60,000 jobs, with July now reflecting a net loss of 10,000 positions.

Beyond hiring volume, wage growth has also stalled. Annual wage growth slowed to 3% in September, marking the lowest level recorded since May 2021. This trend is impacting consumer sentiment as inflationary pressures persist.

"Americans are frustrated by the lack of opportunities right now. Wage growth fell to a new 5-year low and is being wiped out entirely by inflation. That stings heading into the holidays," said Heather Long, chief economist at Navy Federal Credit Union.

Federal Reserve Policy Outlook

The weak labor data has shifted market expectations for the Federal Reserve's next policy move. Following the release of the report, the market-implied probability that the Federal Reserve will hold interest rates steady at its October 27-28 meeting rose to 82.8%.

What Is at Stake for the Labor Market

The rise in unemployment to 4.2% as of September 2026, based on FRED economic data, highlights a shift in the labor supply-demand balance. The combination of slowing payroll additions and waning wage growth suggests that businesses are becoming more cautious in their expansion plans, pointing toward a broader trend as the year-end approaches.