U.S. economy adds fewer jobs than expected as unemployment rate ticks higher
Investing.com - The U.S. economy added fewer jobs than anticipated in September, while the unemployment rate ticked higher, potentially bolstering the case for the Federal Reserve to keep rates steady at its next meeting later this month.
Nonfarm payrolls for September came in at 29,000, according to Labor Department data on Friday. Economists had expected the figure to stand at 89,000, down from 162,000 in August.
The chnage in total nonfarm payrolls for July was also revised down by 31,000, from a gain of 21,000 to a loss of 10,0000. With the revisions, employment in July and August combined is 60,000 lower than previously reported. Over the prior 12 months, average monthly payrolls were 45,000.
Healthcare employment remained on an upward trend, albeit at a slower pace than the 12-month average. Financial activities employment also inched down by 7,000, and has now fallen by 129,000 from a recent peak in May 2025, with most of the job lesses in insurance carriers, the Labor Department said.
Meanwhile, the unemployment rate edged up to 4.2%, versus projections that it would match August’s level of 4.1%.
Analysts have been keeping close tabs on the job numbers as they calibrate expectations for the Fed’s upcoming two-day policy meeting on October 27-28.
Bets that the central bank will once again raise rates at the gathering have waned in recent days in response to cooler-than-anticipated inflation data and a series of comments from Fed members downplaying the need for another imminent hike. In the wake of the employment figures, markets were pricing in a roughly 84% chance that the Fed will stand pat on rates, up from around 76% a day ago and 36% last week. The probability of a rate hike, on the other hand, has fallen to roughly 16% from about 64% a week ago.
In September, the Fed lifted rates by a quarter of a percentage point as part of a bid to corral elevated inflation, which has been fueled by the war in the Middle East and massive spending on artificial intelligence infrastructure.
Signs of instability in the labor market could give Fed officials pause as they deliberate over further increases. In theory, rate hikes can put a lid on inflationary pressures, but risk denting growth and the wider employment picture.
In a note, analysts at Vital Knowledge said the "knee-jerk reaction is dovish" to the employment data, highlighting that average hourly wage growth of 0.1% month-on-month was milder than expected.
However, they flagged that the Fed "cares much more about inflation than employment right now, which means this [...] reading isn’t likely to alter the mindset of many at the central bank."