U.S. employers added a modest 29,000 jobs in September, marking a significant drop from the revised 133,000 jobs created in August, according to a Labor Department report released Friday. The unemployment rate edged up slightly to 4.2 percent from 4.1 percent the previous month. Economists had anticipated a payroll increase closer to 90,000, and revisions to July and August data reduced previously reported job gains by a combined 60,000.
The latest figures arrive amid growing economic uncertainty ahead of the November 3 midterm elections, amid widespread public concern about inflation and the cost of living. Despite the slowdown in hiring, the unemployment rate remains near historically low levels, though the pace of wage growth slowed to a 3 percent year-over-year increase, the smallest gain since May 2021.
Labor market dynamics may influence the Federal Reserve’s upcoming policy decisions. The Fed balances its dual mandate of maximum employment and stable prices, but recent statements from officials indicate a primary focus on curbing inflation, which has remained above the central bank’s 2 percent target for over five years. The subdued hiring numbers in September could bolster arguments for maintaining the current interest rate levels at the Fed’s next meeting rather than implementing further increases.
Sector-specific trends varied, with federal, state, and local governments collectively shedding 17,000 jobs. Professional and business services trimmed 9,000 positions, while healthcare added 17,000 jobs, about half its average monthly gains over the past year. An economist pointed to the Trump administration’s rollback of work authorizations for approximately 350,000 Haitians as a possible factor influencing healthcare employment. The construction and manufacturing sectors saw modest expansions, adding 11,000 and 9,000 jobs respectively.
The rise in unemployment also reflected a surge of 485,000 new entrants to the labor force, many of whom were unable to secure immediate employment. The overall job market has demonstrated resilience amid various economic shocks, including trade tensions, persistent inflation, elevated interest rates, and geopolitical instability affecting energy prices.
Financial markets reacted positively to the report, with futures for major stock indexes rising on speculation that the Federal Reserve may hold interest rates steady. Treasury yields declined following the data release.
Despite these gains, consumer sentiment remains weak. A recent poll found only 17 percent of U.S. adults approve of President Donald Trump’s handling of the cost of living, and just 26 percent approve of his management of the overall economy, the lowest levels recorded recently. Confidence in job prospects also plunged, with nearly 28 percent of respondents expecting fewer jobs to be available in six months, double the share anticipating growth.
Additional measures of worker sentiment align with these concerns. An index from an online employment platform showed employee confidence at its lowest since records began in 2016, a period spanning the global pandemic. Experts attribute this to growing anxiety about layoffs and uncertainties linked to technological changes, such as artificial intelligence.
The current labor market is marked by a “low-hire, low-fire” pattern, where employers are reluctant both to lay off staff and to ramp up hiring, leading to fewer opportunities for job seekers. Many workers feel constrained, hesitant to leave their current positions in the absence of better prospects elsewhere.
Average monthly job creation this year stands at 68,000, significantly higher than the roughly 9,700 average in 2025, which was the weakest non-recession hiring period since 2002. Demographic shifts, including retirements among baby boomers and stricter immigration policies, have reduced the labor pool, lowering the threshold needed to maintain stable unemployment.
Small businesses like Sky Castle Toys in Seattle continue to expand staffing despite higher operational costs, reflecting varied experiences across the economy. The company has doubled its staff since last year and reported strong sales growth in affordable toys preferred by budget-conscious consumers.
Economists suggest that the U.S. labor market may settle into a lower, more moderate growth range, with job increases in the 25,000 to 75,000 range expected to persist in the near term.