US employers added 29K jobs in September, far short of the 90K economists had forecast, the Bureau of Labor Statistics reported. The unemployment rate rose to 4.2% from 4.1% in August.
Revisions did more damage than the headline. Downward revisions to July and August totaling 60K showed the economy actually lost jobs in July. August's gain was cut to 133K from an initial reading of 162,000.
Hiring was little changed across major sectors from tech to retail. Healthcare added 17K jobs. The financial sector shed 7K, extending a slump that began in May 2025.
Manufacturing added jobs for a fourth consecutive month, while information, finance and professional business services all declined. Wage growth cooled to 3% year on year, still lagging inflation.
Markets read the weakness as a Fed pause
Stocks and bonds rallied on the print. Futures tracking the S&P 500 rose 0.9%. The 2-year Treasury yield dropped 7 basis points to 4.716%.
Odds of a rate increase at this month's meeting fell as low as 12%. The Fed recently lifted rates to 3.75%-4%, and December now looks like the most likely date for any further move.
Economists flagged seasonal adjustment volatility as a likely driver of both the weak payroll count and the August revision.
The rise in unemployment came partly from more people entering the labor force, not from mass job losses. That pattern fits what analysts describe as a low-hire, low-fire equilibrium, where roughly 50K jobs a month is enough to keep the market stable.
AI layoffs are showing up in the data
Companies including BMW and Amazon are now openly attributing layoffs to AI, with tech-sector cuts already surpassing 2025 levels. Minneapolis Fed President Neel Kashkari has said AI investment supports GDP growth while possibly slowing hiring.
Higher energy prices tied to ongoing geopolitical conflict complicate the inflation picture the Fed must weigh against a softening labor market.
This was the final jobs report before the November midterm elections, putting the economy squarely in front of voters.
For investors, weak jobs plus a constrained Fed has been the setup supporting tech, crypto and gold valuations all year. September did nothing to break it.
