Hiring in September grew much less than expected, jobs report shows

Hiring grew much less than expected in September as a monthslong surge of inflation weighed on shoppers and rattled bond markets, according to the federal government’s monthly jobs report.

Employers added 29,000 jobs in September, a sharp slowdown from the 162,000 jobs added in August, the U.S. Bureau of Labor Statistics data showed. Economists expected employers to have added 84,000 jobs last month.

The unemployment rate ticked up from 4.1% to 4.2%.

Hiring came in below a monthly average gain of 45,000 jobs over the previous 12 months.

The fresh data arrived weeks after the Federal Reserve imposed its first interest rate hike in three years. The move aims to dial back price increases, but it risks an eventual slowdown in hiring as borrowing costs impact businesses.

The economy has shown signs of strain in recent months, including a bond selloff and a resurgence in oil and gasoline prices.

Consumer sentiment dropped last month close to the lowest level ever recorded in the 74-year history of the University of Michigan’s survey.

Despite these headwinds, the labor market has proven sturdy so far this year.

The U.S. added an average of about 80,000 jobs per month over the first eight months of this year, financial services firm Raymond James found in an analysis of Bureau of Labor Statistics data. That pace exceeded Raymond James’ expectations of 70,000 jobs added each month over that period.

The Iran war drove up gasoline prices and catapulted inflation to a three-year high. Inflation eased over the summer, but continued fighting has kept price increases well above pre-war levels.

The annual inflation rate stands at 3.4% as of August, the most recent month on record, putting inflation more than a percentage point above the Fed’s target rate of 2%.

The combination of elevated inflation and a resilient labor market prompted the Fed to raise interest rates a quarter of a percentage point last month.

Investors pegs the chance of another rate increase in October at 20%, according to CME Group’s FedWatch Tool, a measure of market sentiment.

“The plain fact is that inflation is too high and has been for too long,” Fed Chair Kevin Warsh said at a press conference in Washington, D.C., last month.

An increase to the benchmark interest rate raises borrowing costs for consumers and businesses, which in theory should slash inflation by slowing the economy and eating away at demand.

The policy, however, risks a downshift in hiring and an uptick in the unemployment rate, though such fallout typically takes hold after a lag time lasting several months.

By some measures, the economy remains robust.

Gross domestic product grew over three months ending in June, defying fear of a downturn triggered by the Iran war. Consumer spending, which accounts for about two-thirds of U.S. economic activity, rose 0.6% in August from July, the largest monthly increase since March 2025, government data on Wednesday showed.