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U.S. employers added just 29,000 jobs in September, far below expectations, as hiring slowed sharply and unemployment edged higher in a report that underscores growing caution among businesses.
Economists surveyed by FactSet had expected the economy to add about 90,000 jobs. The unemployment rate rose to 4.2% from 4.1% in August, according to the Labor Department.
The report showed a labor market that is neither collapsing nor generating many new opportunities. Hiring remains weak even as layoffs have stayed unusually low, creating a cautious environment for workers and employers alike.
Hiring loses momentum
September’s payroll gain was a sharp slowdown from August, when employers added a revised 133,000 jobs.
The Labor Department also revised July employment down by 31,000 jobs, turning an earlier reported gain of 21,000 into a decline of 10,000. August was revised down by another 29,000. Together, the revisions reduced employment gains for July and August by 60,000.
The weakness was broad. The Bureau of Labor Statistics said employment in all major industries changed little during the month.
Average hourly earnings increased 5 cents, or 0.1%, in September to $37.81. Wages were up 3% from a year earlier, the slowest annual increase since May 2021, according to the Labor Department.
That pace remains below the 3.4% annual inflation rate recorded in August. The September Consumer Price Index is scheduled for release Oct. 14.
The gap between wage growth and inflation has added to concerns about household purchasing power, particularly as energy prices have risen sharply.
A low-hire, low-fire economy
The weak hiring numbers do not yet point to a wave of layoffs.
Challenger, Gray & Christmas reported that employers announced 43,281 job cuts in September, down 20% from the same month a year earlier and the lowest September total since 2022. Through September, companies had announced 573,195 job cuts, down 39% from the same period in 2025.
But companies also aren’t rushing to expand their workforces.
Employers announced plans to hire about 90,800 workers in September, according to Challenger, down 23% from September 2025. The firm said seasonal hiring plans were unusually muted, suggesting companies remain cautious about expanding payrolls.
That combination—few layoffs and limited hiring—has left the labor market in a holding pattern.
Initial unemployment claims also remained near historically low levels heading into the jobs report, providing another indication that widespread layoffs have not yet emerged.
Inflation and energy costs complicate the outlook
Businesses are confronting a difficult mix of higher costs, elevated interest rates and uncertainty over consumer demand.
August inflation accelerated 3.4% from a year earlier, while the energy index jumped 16.3% over the same period. Gasoline prices rose 27.4% year over year.
The combination could make companies more reluctant to commit to new workers, particularly if higher energy and other operating costs squeeze profit margins.
At the same time, the labor market has benefited from a relatively low level of layoffs. That has prevented the weaker hiring numbers from turning into a broader deterioration in employment.
What the report means for the Fed
The September jobs report complicates the Federal Reserve’s effort to balance inflation against a cooling labor market.
The central bank raised its benchmark interest rate last month for the first time in more than three years, bringing its target range to 3.75% to 4%. The move was aimed at containing inflation, which remains above the Fed’s 2% annual target.
But the latest employment figures make another increase at the Fed’s October meeting less likely.
Markets sharply reduced expectations for an October rate hike following the jobs report, while Treasury yields fell. The weak hiring numbers give policymakers more reason to wait and assess whether the labor market is continuing to weaken before raising borrowing costs again.
Inflation, however, remains the Fed’s central concern. A renewed rise in energy prices could keep consumer prices elevated even as hiring slows, leaving policymakers with competing economic pressures.
For workers, the immediate problem is different: Jobs are still available, but employers are creating fewer new opportunities.
September’s report therefore offers a mixed picture. The labor market is not showing the mass layoffs associated with a severe downturn, but the sharp slowdown in hiring suggests businesses are becoming increasingly reluctant to add workers.
Whether that caution proves temporary or becomes a broader slowdown will depend on the direction of inflation, energy costs, interest rates and consumer demand in the months ahead.
