U.S. employers added a modest 29,000 jobs in September, while the unemployment rate rose slightly to 4.2%, the Labor Department reported Friday. The figures mark a slowdown from August’s revised increase of 133,000 jobs and come ahead of the Nov. 3 midterm elections, during a period of public concern over inflation and economic conditions.
Economists had anticipated payroll growth closer to 90,000 for the month. Additionally, revisions to July and August payroll data reduced reported job gains by a combined 60,000 positions. The unemployment rate, though up from 4.1% in August, remains near historically low levels.
The labor market’s deceleration is likely to attract scrutiny from the Federal Reserve as policymakers prepare for their next meeting. While the Fed has primarily concentrated on curbing inflation in recent months, the weaker job market may encourage officials to hold interest rates steady rather than pursue further hikes. Average hourly wages increased by 3% year-over-year in September, the smallest gain since May 2021, suggesting reduced wage pressures on inflation.
Government employment declined by 17,000 jobs, driven by cuts at federal, state, and local levels. The professional and business services sector reduced payrolls by 9,000, while healthcare added 17,000 positions—about half its monthly average over the last year. Some analysts attribute the slowdown in healthcare hiring partly to the Trump administration’s termination of work authorizations for approximately 350,000 Haitian nationals.
Construction and manufacturing saw modest employment gains of 11,000 and 9,000 jobs, respectively. The uptick in unemployment is partially explained by 485,000 new entrants to the workforce, many of whom did not secure employment immediately.
Despite the cumulative challenges posed by trade tensions, persistently high inflation, rising interest rates, and geopolitical conflicts affecting energy prices, the U.S. labor market has shown resilience. Nevertheless, public sentiment remains subdued. An Associated Press-NORC poll found just 17% of Americans approve of President Donald Trump’s handling of the cost of living and only 26% approve of his overall economic management, marking a record low.
Consumer confidence fell to its lowest point in over a decade, according to the Conference Board, with more than 28% of respondents expecting fewer job opportunities in the coming six months—twice as many as those anticipating an increase. Similarly, Glassdoor’s employee confidence index hit a record low last month, reflecting growing worker anxiety about layoffs, technological disruption, and uncertain career prospects.
The current labor market is characterized by a low rate of hiring combined with low layoffs, creating a cautious environment in which employees feel secure in their current roles but job seekers face difficulties finding new positions. Workers are increasingly reluctant to quit due to limited opportunities for better pay or improved working conditions.
Overall, employers—including private firms, government agencies, and nonprofits—have added an average of 68,000 jobs per month in 2026, a significant improvement from 2025’s anemic monthly average of 9,700 new jobs, the weakest annual hiring pace since 2002 outside of a recession. Demographic shifts such as baby boomer retirements and immigration restrictions have reduced labor force growth, meaning fewer new jobs are required to maintain stable unemployment.
Economic observers expect monthly job gains to stabilize between 25,000 and 75,000 in the near term. Meanwhile, some companies like Seattle-based toy manufacturer Sky Castle Toys continue to expand, with staff levels doubling in the past year and sales increasing by 60% in the first eight months of 2026, despite rising transportation costs impacting profitability.
As the midterm elections approach, the mixed signals from the labor market underscore the challenges facing both policymakers and voters in navigating an economy balancing slow growth, inflationary pressures, and evolving workforce dynamics.