US job growth slows to 29,000 as July payrolls are revised into contraction

US nonfarm payroll employment increased by just 29,000 in September, while the unemployment rate was 4.2%, according to the Bureau of Labor Statistics. The agency said employment in all major industries changed little during the month and revised the combined July and August payroll counts downward by 60,000 jobs.

The revisions were particularly notable because July was changed from a previously reported gain of 21,000 jobs to a decline of 10,000, while August was revised from 162,000 to 133,000. Average monthly payroll growth over the prior 12 months was only 45,000, reinforcing evidence that hiring has slowed substantially even though the labour market has not shown the broad surge in layoffs normally associated with a recession.

Why did the September payroll number miss economists’ expectations by such a wide margin?

Economists surveyed by Reuters had expected an increase of roughly 90,000 jobs, making the official 29,000 figure materially weaker than consensus. Monthly payroll data can be volatile because employers report at different times and seasonal adjustments can move sharply around holidays, which is one reason the BLS routinely revises earlier estimates.

September’s weakness therefore needs to be viewed alongside subsequent revisions rather than treated as an isolated number. The downward revisions to July and August imply that the labour market entered September with less momentum than previously understood.

That changes the economic narrative without proving that the United States has entered a jobs contraction. The BLS itself characterised both payroll employment and unemployment as changing little, which is more precise than describing the report as a collapse.

Which parts of the US economy are still creating jobs?

Healthcare continued to add employment, increasing by about 17,000 positions in September, although that was below its average monthly increase of 33,000 during the previous year. Ambulatory healthcare services and hospitals continued trending higher, while employment across most other major sectors changed little.

The concentration of job creation is important because healthy headline employment growth is generally more durable when several industries are hiring simultaneously. A labour market relying increasingly on a small number of sectors can become more vulnerable if those sectors eventually slow.

At the same time, broad stability across industries is different from widespread job destruction. September produced weak hiring but did not show a nationwide wave of employers cutting payrolls.

What happened to wages as hiring slowed in September?

Average hourly earnings for private nonfarm workers increased by five cents, or 0.1%, to $37.81 in September. Over the previous 12 months, average hourly earnings were up 3%, while the average private-sector workweek remained unchanged at 34.4 hours.

Slower wage growth can reduce inflation pressure because labour costs are an important component of service-sector pricing. It can also reduce household income momentum if prices remain elevated, making the balance between inflation and real purchasing power particularly important.

The combination of modest payroll growth and cooling wage gains gives the Federal Reserve more evidence that labour-market pressure is easing. That does not automatically dictate a particular rate decision because policymakers must also consider inflation, energy prices and financial conditions.

Why do the downward revisions matter as much as the September number itself?

Payroll revisions change the historical baseline from which the current month is interpreted. If August had remained at 162,000, September’s 29,000 would look like an abrupt one-month fall; revising August to 133,000 and July to minus 10,000 shows that the weakening trend had already begun earlier.

The BLS said the combined changes reduced July and August employment by 60,000 compared with previous estimates. Those revisions result from additional employer reports and updated seasonal factors rather than a new survey of the entire labour market.

This is why employment reports should not be treated as final on release day. Markets and policymakers receive an initial estimate quickly, but later data can materially change understanding of the trajectory.

Does the September report mean the Federal Reserve will stop raising interest rates?

The report reduces the case for immediate additional tightening but does not mechanically determine the outcome. Reuters reported that market expectations for another October rate increase fell after the employment data, reflecting investors’ judgment that the central bank has less reason to cool demand further when job creation is already weak.

Energy-driven inflation remains the main counterweight. If oil and fuel prices continue keeping inflation substantially above target, the Federal Reserve could still face pressure to maintain restrictive policy even with softer employment.

The September jobs report therefore increases the tension between the Fed’s two objectives. Inflation argues for caution on easing, while weak hiring argues against unnecessary additional restraint.

What are the key takeaways from the September US employment report?

Payrolls increased by 29,000, the unemployment rate was 4.2%, and employment across major industries changed little. July and August together were revised down by 60,000, including a revised July decline of 10,000 jobs.

Wages rose only 0.1% during the month and 3% from a year earlier, while healthcare remained one of the few sectors continuing to generate notable employment. The data therefore show a labour market losing hiring momentum rather than one experiencing large-scale layoffs.

For the Federal Reserve, the significance lies in trend rather than a single print. Several months of weak job creation would materially change the policy balance, while a rebound in October would make September appear more temporary.

What should businesses and markets watch after the sharp September hiring slowdown?

Weekly unemployment claims, October payrolls and the next inflation readings will determine whether the slowdown is broadening. Employers’ hiring plans will also matter because companies can initially respond to uncertainty by leaving vacancies unfilled before moving toward layoffs.

For households, wage growth and working hours may become as important as the headline unemployment rate. A labour market can remain technically stable while income momentum weakens, and that distinction will shape consumer spending through the final quarter of 2026.