US employers added far fewer jobs than expected in September, while the unemployment rate moved higher, pointing to a continued cooling in the labour market and further reducing expectations that the Federal Reserve will raise interest rates at its October meeting.

Nonfarm payrolls increased by 29,000 in September, compared with the 84,000 gain expected by economists in the Dow Jones consensus.

The unemployment rate rose to 4.2% from 4.1%, while the labour force participation rate edged up to 61.8%.

The September employment gain was also accompanied by significant downward revisions to the previous two months.

July payroll growth was revised down by 31,000, from an initial increase of 21,000 to a decline of 10,000.

August employment growth was revised down by 29,000, from 162,000 to 133,000.

The revisions mean employment gains in July and August combined were 60,000 lower than previously reported.

The unemployment rate has remained within a relatively narrow 4.1%-to-4.3% range since March.

The employment-population ratio stood at 59.2% in September.

“The US jobs data is out and there are surprises: Job creation was only 29,000 in September, with the unemployment rate rising to 4.2% and monthly earnings growth moderating to only 0.1%. Add to that downward revisions to both July and August (about 60,000 jobs). On the supply side, a more encouraging development with labor force participation increasing to 61.8%,” Mohamed A El Erian, economist, Rene M. Kern Professor of Practice at the Wharton School, and chief economic advisor at Allianz, said on X.

“This will reinforce the impact of recent Fedspeak in calming expectations about an October rate hike,” he added.

The weak jobs report immediately boosted financial markets as traders assessed what the figures could mean for the Fed’s next policy decision.

S&P 500 futures rose 0.8% early Friday, while Dow Jones Industrial Average futures gained 458 points, or 0.9%. Nasdaq-100 futures climbed 1.2%.

Treasury yields also fell, with the 10-year yield dropping more than 5 basis points to 5.176%.

Health care gains slow as financial jobs decline

Employment trends across sectors also pointed to a more uneven labour market.

Health care employment continued to rise in September, adding 17,000 jobs, although that was below the sector’s average monthly increase of 33,000 over the previous 12 months.

Construction employment changed little, with the sector adding 11,000 jobs in September.

That was broadly in line with its average monthly gain of 10,000 over the past year.

Employment among nonresidential specialty trade contractors continued to increase, rising by 12,000.

Financial activities, meanwhile, lost 7,000 jobs during the month.

Employment in the sector has fallen by 129,000 since its recent peak in May 2025, with insurance carriers and related activities accounting for 90,000 of the decline.

Markets strengthen bets against October hike

The market reaction reflects a sharp change in expectations for the Fed’s October meeting.

Federal Reserve Bank of New York President John Williams said on Tuesday that there was “no need for urgency” in changing the current setting of monetary policy, although he said “one further upward adjustment” in the policy rate may be appropriate later this year.

Federal Reserve Vice Chair Philip Jefferson echoed that caution on Thursday, saying: “Any future adjustments in policy should be determined by carefully examining trends in the data, the evolving outlook, and the balance of risks.”

Traders are now pricing only about a 25% chance of a rate hike this month, down from roughly 70% earlier in the week.

The shift was also reinforced by Wednesday’s inflation data, which showed the personal consumption expenditures price index rising 3.4% year over year in August.

While the reading remained well above the Fed’s 2% target, it was unchanged from July, offering little fresh evidence of accelerating price pressures.

Against that backdrop, global brokerages now largely expect the Fed to deliver just one more rate hike this year, with December seen as a more likely window than October.

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