US Hiring Slows to 29,000 as Unemployment Rises to 4.2%

The US economy added 29,000 jobs in September, far below the 90,000 forecast in a Reuters poll. Figures released on 2 October also put unemployment at 4.2%, up from 4.1% in August.

Revisions also weakened the picture. August’s gain was reduced to 133,000, while July now shows a loss of 10,000 jobs. Together, the two months had 60,000 fewer jobs than previously reported.

Pay growth was modest too. Average hourly earnings rose 0.1% in September and 3.0% over the year, according to the Bureau of Labor Statistics. Healthcare added 17,000 jobs, although its hiring pace was below the average of the previous 12 months.

The report does not necessarily signal a sudden downturn. Economists cited by Reuters pointed to seasonal distortions around the late Labor Day holiday and little evidence of a broad rise in layoffs. More people entering the workforce also contributed to the higher unemployment rate.

For the Federal Reserve, weaker hiring adds another consideration alongside inflation, which remains above its 2% target. Reuters reported that markets briefly cut the probability of an October rate increase to 13%, before it recovered to around 23%—close to the previous day’s level.

The market response was mixed: US stocks were higher and the dollar softened during Friday’s session, but Treasury yields rose after initially falling. The message is more nuanced than a simple bet on lower rates: hiring has cooled, while inflation still complicates the Fed’s next decision.

Sources: Reuters, via MarketScreener and US Bureau of Labor Statistics. Data released 2 October 2026.

Cover photo: The Federal Reserve’s Eccles Building in Washington, D.C., 29 March 2011. Archival illustration. Britt Leckman / Federal Reserve via Wikimedia Commons. Public domain.