U.S. employers added just 29,000 nonfarm payrolls in September, far below the 84,000 to 89,500 gain expected by economists, according to data released Friday. The unemployment rate ticked up to 4.2% from 4.1%, while the labor force participation rate rose to 61.8%.
The September figures also came with substantial downward revisions: July was revised from an initial increase of 21,000 to a decline of 10,000, and August was cut from 162,000 to 133,000. Combined, July and August employment gains were 60,000 lower than previously reported.
The weaker-than-expected labor market data immediately shifted expectations for the Federal Reserve's October 28 policy meeting. Traders now price only about a 25% chance of a rate hike this month, down from roughly 70% earlier in the week, according to the CME FedWatch tool. New York Fed President John Williams said Tuesday there was "no need for urgency" in changing monetary policy, while Fed Vice Chair Philip Jefferson said Thursday that future adjustments should be determined by carefully examining data, the outlook, and the balance of risks.
Equity futures rallied after the report: S&P 500 futures rose about 0.8%, Dow Jones Industrial Average futures gained roughly 458 points, or 0.9%, and Nasdaq-100 futures climbed 1.2%. The 10-year Treasury yield dropped more than 5 basis points to about 5.176%. Oil prices fell sharply earlier, with Brent crude near $99 a barrel, as attention turned to interest rate expectations and the ongoing Middle East conflict, now in its eighth month.
Economist Mohamed El-Erian called the report a surprise and said it would "reinforce the impact of recent Fedspeak in calming expectations about an October rate hike." Health care added 17,000 jobs, construction added 11,000, while financial activities lost 7,000, extending a decline of 129,000 since May 2025.
Against that backdrop, global brokerages largely expect just one more rate hike this year, with December now seen as more likely than October.
