Show summary Hide summary
The U.S. labor market cooled in September 2026, with employers adding far fewer jobs than economists expected and the unemployment rate edging up. The Bureau of Labor Statistics on Friday said payrolls increased by 29,000 in September — well below the 90,000 gain forecast in an LSEG poll — and the unemployment rate rose to 4.2% from earlier levels.
What the report shows
The BLS report included sizeable downward revisions to prior months: July payrolls were revised down by 31,000, turning a previously reported 21,000 gain into a 10,000 loss, while August was revised down by 29,000 from a 162,000 gain to 133,000. Combined, July and August employment is 60,000 lower than earlier reported.
DCCC seeks ads criticizing GOP approach to AI and data centers across dozens of House races
Clock shows 2:57
Private-sector employment grew by 46,000 in September, below the 85,000 gain economists in the LSEG poll had expected. Government payrolls contracted by 17,000; within that decline the federal government lost about 1,000 jobs, state employment fell by roughly 3,000 and local government payrolls dropped by about 13,000, with most state and local losses concentrated in education.
By industry, manufacturing added about 9,000 jobs, close to but slightly under forecasts. Healthcare employment rose by 16,700, led by gains in ambulatory health care services (+13,400) and hospitals (+12,000), while nursing and residential care facilities shed about 8,700 jobs. Construction payrolls were little changed overall but increased by 11,000 in September, including a 12,300 gain in nonresidential specialty trade contractors. Financial activities lost around 7,000 jobs and remain down roughly 129,000 from a recent peak in May 2025, with most of that decline in insurance-related employment.
Average hourly earnings were up 3.0% year over year in September, a bit below the 3.2% increase economists surveyed by LSEG had expected.
Worker-side indicators
Measures of underemployment and long-term joblessness showed limited improvement. The number of people unemployed for 27 weeks or more was essentially unchanged at about 1.9 million in September, representing 27.1% of all unemployed persons. Those working part time for economic reasons — people who would prefer full-time work but had reduced hours or could not find full-time jobs — held steady at about 4.5 million. The labor force participation rate was 61.8% and the employment-population ratio was 59.2%, both little changed and showing minimal net movement since January.
How experts interpreted the results
Vanguard senior economist Adam Schickling described the report as evidence that “the labor market remains resilient, but it is not accelerating.” He said hiring is subdued, layoffs remain low, and monthly payroll readings are likely to keep producing mixed signals, arguing the data support a “low-hire, low-fire” characterization.
Phil Camporeale, chief investment strategist at JPMorgan Wealth Management, said the combination of weaker-than-expected job growth, negative revisions to prior months and slower wage growth point away from the labor market being a current source of inflationary pressure. He added that the report is “an ideal outcome for financial markets” because it reduces the need for aggressive policy tightening.
Implications for interest rates and markets
The softer jobs number increased the odds that the Federal Reserve will leave its benchmark federal funds rate unchanged at the current 3.75%–4.00% target range when it meets in late October. The CME FedWatch tool showed a roughly 79.5% probability that the Fed will hold rates steady at the October meeting, up from 75.6% a day earlier and 35.8% a week prior. The tool also indicated about a 66.2% chance of a 25-basis-point hike by the mid-December meeting, compared with a 51% chance a week earlier of a 50-basis-point move before year-end.
Financial markets reacted positively to the report and the reduced likelihood of near-term tightening. As of mid-morning trading, the S&P 500 was up about 0.96%, the Dow Jones Industrial Average rose roughly 0.61%, and the Nasdaq Composite climbed about 1.63%.
