U.S. employers added far fewer jobs than expected as unemployment rose to 4.2% and wage growth cooled.
Employers added just 29 thousand jobs last month — a significant drop from the revised number of 133 thousand in August — according to the Labor Department. The unemployment rate rose slightly to 4.2% as workforce participation increased. Economists had expected around 90 thousand new jobs — making the actual figure much weaker than forecast.
Labor Department revisions also reduced job counts for July and August by 60 thousand combined. The Federal Reserve may now pay closer attention to employment data as it continues its focus on inflation control.
Despite the soft hiring numbers wage growth remains modest and rose 3% year over year according to The Orange County Register. Analysts say this lack of wage pressure suggests inflationary concerns are not yet driving labor market changes. Government employment fell by 17 thousand jobs last month while professional and business services trimmed 9 thousand positions.
Healthcare companies added 17 thousand jobs in September though that is less than the average monthly gain of 33 thousand over the past year. Economists have said immigration policy changes affecting Haitian workers may be one factor behind weaker hiring in labor-intensive sectors. Construction and manufacturing saw modest gains with 11 thousand and 9 thousand jobs added respectively.
The labor force grew by 485 thousand people in September while employment increased by 406 thousand and unemployment rose by 78 thousand.
Despite these signs the job market has shown resilience through various economic challenges including trade wars and high interest rates as well as energy price spikes. The report comes about a month before the November midterm elections.
Financial markets reacted positively to the soft hiring numbers with major stock indices rising as expectations for an October rate hike fell. However public sentiment remains negative with consumer confidence at its lowest level in over a decade. More than 28% of respondents expect fewer jobs to be available in six months — double the number who anticipate growth.
Glassdoor’s employee confidence index dropped to a record low in September and marked its third such low point this year. Glassdoor’s chief economist Daniel Zhao noted that workers are increasingly anxious about layoffs and the impact of artificial intelligence on jobs. The labor market has entered a period where employers are not laying off many workers but also not hiring significantly.
A measure of gross hiring has remained flat for over two years and indicates a stagnant job creation environment. This pattern is described by economists as a ‘low-hire low-fire’ labor market where job seekers struggle to find openings. Workers are hesitant to quit their jobs due to the difficulty of finding new ones according to Glassdoor’s Zhao.
This environment has led many to feel stuck in their current positions despite the overall stability of the job market.
Employers have averaged 68 thousand new jobs per month so far this year — a marked improvement from 2025’s low hiring levels. Even with these improvements the pace of job creation remains below what would be considered strong in recent years. The Associated Press reported that Sky Castle Toys in Seattle continues to grow its workforce despite higher transportation costs.
The company has more than doubled its staff from last year to 50 employees and saw a 60% increase in sales between January and August compared with the same period last year. The company’s success reflects a broader trend of businesses adapting to economic pressures while still expanding operations. The Bureau of Labor Statistics reported that manufacturing has been on an upward trajectory since its recent low in December 2025.
Financial activities lost 7 thousand jobs in September while information lost 10 thousand positions and professional and business services lost 9 thousand. The Dow Jones Industrial Average and Nasdaq Composite Index both rose after the report was released. Federal Reserve officials have indicated that inflation remains their top concern even as job growth slows.
Market expectations for a rate hike in October diminished after the soft jobs data; Reuters reported traders priced in roughly a 23% chance of a hike after the report and about a 77% chance of no change. The Federal Reserve is scheduled to meet on October 27 and 28 to decide whether to adjust interest rates.
Fed Vice Chair Philip Jefferson said future policy adjustments should be based on trends in the data and the evolving outlook. New York Fed President John Williams emphasized that there is no urgency to raise rates at this time. Payroll growth has varied widely throughout 2026 — from a loss of 156 thousand jobs in February to a gain of 214 thousand in March.
The latest data shows that wage growth has slowed to 3% year over year. Glassdoor’s employee confidence index fell to a record low in September — the third time that has happened this year. Layoffs remain low with first-time unemployment claims dropping to 197 thousand last week.
Economists say that job openings are declining and hiring is slowing while the unemployment rate remains relatively low. Despite these trends many workers continue to express concern about job security and future employment prospects.
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