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watch nowVIDEO04:14Labor market faltered in September as jobs increased by just 29,000, unemployment rate rose to 4.2%Squawk Box
The U.S. economy created far fewer jobs than expected in September, pointing to a surprising soft spot in the labor market and broader economy.
Nonfarm payrolls rose a seasonally adjusted 29,000 for the month while the unemployment rate increased to 4.2%, the Bureau of Labor Statistics reported Friday. Economists surveyed by Dow Jones had been looking for job growth of 84,000 and an unemployment rate of 4.1%.
In addition to the weakness in September, the August jobs count was revised lower to reflect a gain of 133,000 while July switched from a gain to a loss as payrolls fell by 10,000. The revisions in total showed 60,000 fewer jobs than previously reported.
Market reaction was swift to the report, with traders interpreting the soft jobs numbers as good news as they likely further cemented the Federal Reserve staying put at its October meeting. Stock futures jumped after the release while Treasury yields slumped after recently rising to levels not seen since the early part of the century.
Fed officials more closely watch the unemployment rate than the headline payrolls numbers.
The household survey, which is used to calculate the jobless level, was a bit better than the establishment survey, which is used to derive the payrolls count.
Household employment rose by 78,000 for the month, while the labor force swelled by 485,000 and the participation rate, which counts those working or actively searching for a job as a share of the total labor force, increased 0.2 percentage point to 61.8%, its highest since May.
An alternative measure of unemployment, which includes discouraged workers and those holding part-time jobs for economic reasons, edged lower to 7.6%, its lowest since January 2025.
The report comes with Federal Reserve officials weighing the state of the economy and how it should impact their next interest rate move.
Following statements in recent days from central bank policymakers, markets have recalibrated expectations and now expect the rate-setting Federal Open Market Committee to hold off until December for their next hike. The FOMC raised benchmark rates a quarter percentage point in September.
Policymakers largely see inflation a larger threat to the economy than the labor market, which has shown resilience in recent months. The data has pained a picture of a low-hire low-fire economy, with weekly jobless claims low and one indicator showing layoffs at their lowest rate in four years.
Inflation, though, has held well above the Fed’s 2% target. The most recent indicator of the central bank’s preferred gauge showed core inflation at a 3% annual rate.
Wages, though, continued to show signs of disinflation.
Average hourly earnings increased just 0.1% in September, putting the 12-month gain at 3%. Wall Street had been looking for respective readings of 0.3% and 3.1%.
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