US September Nonfarm Payrolls Rise 29,000 vs 90,000 Expected; Jobless Rate Ticks Up to 4.2%
Key Takeaways
- •September nonfarm payrolls rose only 29,000 against a 90,000 forecast, and prior months were revised down by a combined 60,000, leaving July with a 10,000 job decline.
- •Wage growth cooled more than anticipated, with average hourly earnings up 0.1% month-over-month versus a 0.3% forecast and the annual pace slowing to 3.0% from an expected 3.2%.
- •After the release, the implied probability of a Federal Reserve rate hike fell from 28% to 15%, two-year Treasury yields dropped to 4.72%, and odds of any hike this year were pared to 88%, leaving December's meeting in doubt.
- •The household survey offered an offset, with employment up 406,000, the labor force expanding by 485,000, and participation climbing to 61.8%, which softened the significance of the unemployment rate rising to 4.2%.
- •Gains in healthcare, construction, and manufacturing were outweighed by losses in financial activities, government, professional and business services, and information, indicating the weakness was broad rather than distortion-driven.
The US labor market turned in a sharply weaker-than-expected performance in September, with nonfarm payrolls increasing by just 29,000 against forecasts of a 90,000 gain, according to the employment report published by ForexLive. Nonfarm payrolls, produced monthly by the Bureau of Labor Statistics, is among the most closely watched US economic releases because it feeds directly into expectations for Federal Reserve interest rate decisions.
The weakness was compounded by downward revisions. The prior month's payroll count was cut to 133,000 from an initially reported 162,000, and the two preceding months were revised lower by a combined 60,000, leaving July with a decline of 10,000 jobs. Revisions are a routine feature of the payroll release, since the figures are estimates recalculated as more complete data arrive, and cuts of this size reshape the underlying trend that the original prints implied.
Headline Labor Data
The unemployment rate rose to 4.2% from the prior 4.1%, whereas economists had expected it to hold steady. The unrounded unemployment rate came in at 4.1753%, compared with 4.1413% previously. The labor force participation rate climbed to 61.8% from 61.6%, and the U6 underemployment measure edged down to 7.6% from 7.7%.
Private payrolls rose 46,000, short of the 85,000 forecast and well below the prior 127,000. Manufacturing payrolls increased 9,000 versus a 10,000 expectation, while government employment fell 17,000 after a prior gain of 35,000.
Wage Growth Cools Markedly
Average hourly earnings rose just 0.1% month-over-month against expectations of a 0.3% increase, and the year-over-year pace slipped to 3.0%, below the anticipated 3.2%. In dollar terms, hourly pay advanced only 5 cents in September. The average workweek held at 34.4 hours, slightly above the expected34.3, offering little evidence that employers are aggressively cutting worker hours, but wage pressure is moving in the right direction from an inflation perspective. Wage growth is closely monitored by the Federal Reserve as a driver of domestic inflation, which gives the slowdown in this print added weight alongside the headline payroll miss.
Market Reaction
Financial markets repriced rapidly after the release. Ahead of the data, fed funds pricing implied a 28% chance of a rate hike, USD/JPY traded at 157.60, the two-year Treasury yield stood at 4.78%, and the 10-year yielded 5.23%. In the immediate aftermath, the implied probability of a hike fell to 15%, USD/JPY slipped to 157.15, two-year yields dropped to 4.72%, and 10-year yields declined to 5.17%. The odds of any hike this year were pared to 88%, putting December's meeting up for debate.
Per ForexLive's assessment, the report was dovish and effectively closes the debate on an October rate hike barring a red-hot CPI reading. On that reading, the next scheduled checkpoints for market watchers are the upcoming CPI release and the December Fed meeting, where pricing now leaves the outcome open.
Household Survey Offers an Offset
The household survey provided the one significant bright spot. Employment there rose by 406,000 and the labor force expanded by 485,000, lifting the participation rate two-tenths to 61.8%. For that reason, the rise in unemployment to 4.2% is not viewed as particularly ugly, and the unrounded rate of 4.1753% was only narrowly above the threshold for a 4.2% print. Divergences between the two surveys are not unusual: the establishment survey counts jobs on business payrolls, while the household survey counts employed individuals, so the two measures can move apart in any given month.
Sector Breakdown
No single sector distortion explained away the weakness. Healthcare added 17,000 jobs, including 13,000 in ambulatory care and 12,000 in hospitals, though nursing and residential care lost 9,000. Construction added 11,000, with non-residential specialty trade contractors up 12,000. Manufacturing added another 9,000 and has now gained 72,000 jobs since its December 2025 low.
On the weak side, financial activities lost 7,000 jobs and has now shed 129,000 since May 2025, mostly in insurance. Government employment fell 17,000, professional and business services declined 9,000, and information fell 10,000.
Unlike August, there was no outsized education or restaurant seasonal quirk propping up the headline. The 29,000 gain is best characterized as legitimately weak rather than a figure that can easily be explained away by composition, with private payrolls at only 46,000, a 60,000 two-month net revision to the downside, and a sizable miss on earnings.
