US jobs report: Hiring slows sharply as unemployment rate rises to 4.2%

The jobs gain was far below economists’ expectations. According to Reuters, September report also showed that hiring in August was weaker than previously estimated. August job gains were revised down to 133,000 from 162,000. July employment was also revised down, from a gain of 21,000 jobs to a loss of 10,000.

The revisions mean that employment in July and August combined was 60,000 lower than previously reported. The unemployment rate rose from 4.1% in August to 4.2% in September. The number of unemployed people stood at 7.1 million. The unemployment rate has remained in a narrow range of 4.1% to 4.3% since March. The September report is the latest sign that the US labour market is losing momentum after several years of strong hiring.

Jobs added were far below expectations

The US added only 29,000 nonfarm jobs in September. This compares with an average monthly gain of 45,000 jobs over the previous 12 months. Employment changed little across most major industries.

Healthcare continued to add jobs, although hiring slowed. The sector added 17,000 jobs in September, compared with an average monthly gain of 33,000 over the previous year. Ambulatory healthcare services added 13,000 jobs and hospitals added 12,000. Nursing and residential care facilities lost 9,000 jobs.

Construction added 11,000 jobs, close to its average monthly gain of 10,000 over the past year. Manufacturing employment increased by 9,000 jobs. The sector has added 72,000 jobs since reaching a recent low in December 2025. Plastics and rubber products manufacturing added 5,000 jobs, while machinery manufacturing also added 5,000.

Financial activities employment fell by 7,000 jobs. Employment in the sector has declined by 129,000 since its recent peak in May 2025. Insurance carriers and related activities accounted for 90,000 of those losses.

Employment changed little in other major industries, including mining, quarrying and oil and gas extraction, wholesale trade, retail trade, transportation and warehousing, information, professional and business services, social assistance, leisure and hospitality, other services and government.

Unemployment remains low, but finding a job is harder

The 4.2% unemployment rate remains low by historical standards. The latest data, however, show that people who are looking for jobs are facing a more difficult environment.

The number of long-term unemployed people, those without a job for at least 27 weeks, was 1.9 million in September. They accounted for 27.1% of all unemployed people.

The labour force participation rate remained at 61.8%, while the employment-population ratio stood at 59.2%. Both measures have shown little net change since January.

About 4.5 million people were working part time for economic reasons. These workers wanted full-time jobs but were working fewer hours because their hours had been reduced or because they could not find full-time work.

Another 5.8 million people who were not in the labour force said they wanted a job. They were not counted as unemployed because they had not actively looked for work in the previous four weeks or were not available to take a job.

The number of people marginally attached to the labour force fell by 236,000 to 1.5 million. This group includes people who wanted and were available for work and had looked for a job during the previous year but had not searched during the previous four weeks.

The number of discouraged workers, a smaller group of people who believe there are no jobs available for them, was 414,000 and changed little in September.

A low-hire, low-fire job market

The September numbers fit a pattern that economists have described as a “low-hire, low-fire” labour market.

US employers are not laying off large numbers of workers, which means people who already have jobs generally have relatively strong job security. At the same time, companies are not hiring enough new workers to create many opportunities for people looking for jobs.

The Associated Press reported that a Labor Department measure of gross hiring has remained weak for more than two years.

Glassdoor chief economist Daniel Zhao said workers have become increasingly worried about their employment prospects.

“Employee confidence has been continuously grinding downwards over the last year as workers grow increasingly anxious about everything from layoffs to AI,’’ Zhao told AP.

Zhao also said workers are less willing to leave their existing jobs because finding a new one has become harder.

“They often feel stuck,’’ Zhao said. “Workers aren’t finding there’s opportunity on the open market to find a better job – one that pays more or offers better work-life balance.’’ The average unemployed person had been out of work for more than six months in August, the longest average period of joblessness since February 2022.

Wage growth remains modest

The slower hiring environment is also affecting wage growth. Average hourly earnings for private-sector workers rose by 5 cents, or 0.1%, in September to $37.81. Wages were up 3% over the previous 12 months.

For production and nonsupervisory workers, average hourly earnings increased by 7 cents, or 0.2%, to $32.60.

The average workweek remained unchanged at 34.4 hours. The average manufacturing workweek was also unchanged at 40.6 hours, while overtime remained at 3 hours.

The weaker wage growth follows an increase of just 3.1% in average hourly pay in August from a year earlier, according to the Associated Press. That was the smallest annual increase since May 2021.

Fewer jobs may now be needed to keep unemployment stable

The weak jobs number needs to be viewed alongside changes in the US labour force. The Associated Press reported that economists believe the US may now need to add far fewer jobs each month to prevent unemployment from rising. Baby boomer retirements and the Trump administration’s immigration crackdown have reduced the number of people entering or competing in the labour market.

As a result, economists estimate that the “break-even” rate of job creation could be close to zero jobs a month. About a year ago, the rate was estimated at around 150,000 jobs a month.

Employers have added an average of 80,000 jobs a month so far this year. That is enough to keep the unemployment rate relatively low, but it is well below the average of 166,000 jobs created each month in 2023 and 2024.

It is also far below the average monthly gain of 491,000 jobs during the 2021-2022 hiring boom that followed the pandemic lockdowns.

The 2025 average was just 9,700 jobs a month, which the Associated Press described as the weakest hiring outside a recession since 2002.

Why the labour market feels weaker

The official unemployment rate does not fully capture how difficult the job market has become for some workers. US consumer confidence fell this month to its lowest level in more than a decade, according to the Conference Board. More than 28% of respondents said they expected fewer jobs to be available in six months, compared with 14% who expected more jobs to be available.

Glassdoor’s employee confidence index also fell to its lowest level since records began in early 2016. It was the third record low for the index this year.

Researchers at the Federal Reserve Bank of San Francisco said in August that job searches had become harder for groups that would normally benefit from a strong labour market, including younger workers, less experienced workers and people with fewer proven skills. They also found that people aged 25 to 54 and workers with college education were struggling to find jobs.

The researchers pointed to several possible factors, including the Trump administration’s immigration crackdown, slower hiring by technology companies and government contractors, early effects of AI-related job displacement in professional occupations and uncertainty over government policy. They also said these could be early signs of broader weakness in the labour market.

Jobs report comes before the midterm elections

The September jobs report is the last major monthly employment report before the November 3 US midterm elections, according to the Associated Press.

The report comes at a time when Americans are concerned about the cost of living and the wider economy.

The US labour market has remained relatively resilient despite trade wars, persistent inflation, high interest rates and the conflict with Iran, which has pushed energy prices higher.

The latest jobs data, however, show that hiring has slowed sharply. The unemployment rate remains relatively low at 4.2%, but the combination of weak job creation, longer job searches and modest wage growth points to a labour market where finding a new job is becoming more difficult.

After the jobs data were released, futures for the S&P 500 and Nasdaq composite added to their gains, while Treasury yields moved lower. The 10-year Treasury yield was 5.17%, down from 5.24% a day earlier.