Hiring Nearly Stalled in September, Cooling Bets on Another Fed Rate Hike
Employers added just 29,000 jobs last month and earlier gains were revised sharply lower, sending stocks higher and Treasury yields down as traders slashed the odds of an October rate increase.
The U.S. labor market nearly stalled in September. Employers added just 29,000 jobs last month, the Labor Department reported on Friday — far below the roughly 90,000 forecast by economists in a Reuters poll — while the unemployment rate ticked up to 4.2% from 4.1%.
The report was softer still beneath the headline. August’s gain was revised down to 133,000 from a previously reported 162,000, and July was revised from a gain of 21,000 to a loss of 10,000 — a combined 60,000 fewer jobs than earlier estimates. Wage growth cooled as well: average hourly earnings rose 0.1% on the month and 3.0% from a year earlier, the slowest annual pace since May 2021.
Bad news, good markets
Investors treated the weak data as relief. With a cooling job market reducing the pressure on the Federal Reserve to follow September’s rate increase with another one, the odds of a hike at this month’s meeting collapsed — from roughly two-thirds a week ago to around one in five in futures markets tracked by the CME FedWatch tool. Treasury yields fell across the curve: the two-year yield dropped to 4.725%, the 10-year to 5.182%, and the 30-year to 5.573%.
Stocks rallied on Friday. The Dow Jones Industrial Average rose 251 points, or 0.5%, the S&P 500 gained 0.7%, and the Nasdaq Composite climbed 1.2% to 27,190.86, its second-highest close on record, while the Nasdaq-100 set a record. Nvidia hit a new all-time high as chip stocks led the advance. Gold rose 0.8% to $4,210 an ounce, while oil fell, with Brent crude down more than 2% to around $99.50 a barrel.
A pause, not a panic
Economists cautioned against reading one month as a collapse. Some pointed to seasonal adjustment quirks — payrolls tend to underperform when the Labor Day holiday falls late in the month, as it did this year — and first-time unemployment claims remain near 57-year lows. “It’s a cooler number than expected, but a number that suggests that the labor market remains in a growth mode,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “This is a report that’s going to be friendly to the markets… it suggests that the Fed could likely remain on hold for the October meeting.”
Others were blunter. “This wasn’t a firecracker of a report; it was more like a dud,” said Brian Jacobsen, chief economic strategist at Annex Wealth Management. “The labor market wasn’t as strong as we originally thought it was… This statement supports an October pause.” The central bank’s policymakers next meet on Oct. 27–28, with inflation data, Fed minutes and services-sector surveys due before then.
The longer-term risk, economists warn, lies abroad: the U.S.–Israel war with Iran, with its high energy prices and strained supply chains, is expected to start weighing on hiring by the end of this year and into 2027. For now, though, a job market that is cooling without cracking has given both the Fed and investors exactly what they wanted — room to wait.
Reporting based on coverage by Reuters, Investor’s Business Daily and Dow Jones/Morningstar.