US Adds Just 29,000 Jobs in September as Unemployment Rises to 4.2% and Yields Fall

Hiring in the United States slowed sharply in September. The Labor Department said on Friday that employers added just 29,000 jobs, roughly a third of what economists had pencilled in, and the unemployment rate rose to 4.2% from 4.1% in August.

Forecasts going into the release ranged from about 84,000 to 90,000 new jobs. August's figure was revised to 133,000, which means hiring did not just miss expectations in September but fell sharply from one month to the next.

Bond markets get some relief

The weak report landed at a tense time for markets. The yield on the 10-year US Treasury had recently climbed to around 5.34%, its highest level since 2002, as investors worried that sticky inflation and war-driven energy prices would force the Federal Reserve to raise rates again.

The jobs data pushed the other way. The 10-year yield slipped to about 5.17%, down from 5.24% a day earlier, and futures on the S&P 500 and Nasdaq extended gains. Traders sharply reduced their bets on a rate hike at the Fed's October 27-28 meeting. Their reasoning was simple: payrolls missed badly, unemployment went up and earlier months were revised down, so the case for tightening policy now looks much weaker.

A low-hire, low-fire economy

The headline number hides some nuance. Part of the rise in unemployment came from more people entering the labour force to look for work, not only from job losses. Layoffs remain relatively rare. The real problem is that companies have been reluctant to hire. Economists have taken to calling this a low-hire, low-fire market, where people with jobs feel secure but anyone looking for one faces a long, difficult search.

Slower population growth, driven by retiring baby boomers and tighter immigration, also means the US now needs far fewer new jobs each month to keep unemployment steady than it did a few years ago. Even so, hiring this year has averaged about 80,000 a month, well short of the roughly 166,000 a month seen in 2023 and 2024.

Political stakes ahead of the midterms

This was the last monthly jobs report before the November 3 midterm elections, which will decide whether President Donald Trump's Republicans keep control of Congress. Recent polling has shown voters unhappy with the cost of living and the wider economy, and a soft labour market adds to the pressure on the White House.

Why it matters for India

Indian stock markets were shut on Friday for Gandhi Jayanti, so domestic investors will only react when trading resumes on Monday. Lower US yields and a smaller chance of a Fed hike are usually good news for emerging markets like India. They ease pressure on the rupee, which recently weakened past 96 to the dollar (see our earlier coverage), and can slow foreign investors' selling. How far that relief goes will also depend on crude oil prices and developments around Iran, which remain the bigger swing factors for Indian assets.

This is an original summary based on public reporting. See our editorial policy for how we source, write, and correct our stories.