September Job Growth Stalls Out, Unemployment Rises to 4.2%

America's employment situation slowed much more sharply than expected in September, potentially giving the Federal Reserve breathing room to avoid a second interest-rate hike in 2026.

The Labor Department reported Friday that nonfarm payrolls (NFP) increased by just 29,000 in September, coming in well below Dow Jones-polled economists' expectations for growth of 84,000. Jobs totals for the prior two months were downwardly revised by a total of 60,000 jobs. August's initial read of +162,000 was changed to +133,000, while July's payroll growth of 21,000 was revised back down to a loss (-10,000).

The unemployment rate climbed a notch, to 4.2%, while economists were looking for it to stay flat at 4.1%. Average hourly earnings barely changed, growing 0.1% month-over-month, to $37.81. On a year-over-year basis, that's 3.0% higher, which was below estimates for 3.1% and the slowest such rate in more than five years.

"September payroll growth has tended to underperform its recent trend when Labor Day is later in the month—like it was this year," say Goldman Sachs economists Ronnie Walker and Jessica Rindels, who added that August's sharp increase in nonfarm payrolls was boosted by outsized increases in leisure and hospitality and local educational services payrolls that were unlikely to repeat.

Here's a brief look at the September jobs report's most pertinent details:

• Sep payrolls: +29,000 (Est.: +84,000)
• Sep unemployment: +4.2% (Est.: 4.1%)
• Sep hourly earnings: +3.0% YoY (Est.: +3.1%)
• Aug payrolls (revised): +133,000 (Prev.: +162,000)
• Jul payrolls (revised): -10,000 (Prev.: +21,000)

The government report followed ADP's announcement that 90,000 private-payroll jobs were created in September, which was the strongest such data in three months.

This report will be updated.