The federal government’s monthly jobs report shows employers added 29,000 jobs in September, a significant slowdown from the 162,000 jobs added in August. Economists had forecast 84,000 jobs. The jobless rate climbed from 4.1% to 4.2%.
Employment gains fell short of the monthly average of 45,000 positions added over the prior 12 months. The latest numbers came in well after the central bank moved to raise interest rates for the first time in three years.
What Caused the Slowdown
Rising prices put pressure on consumers, and it has also unsettled investors in fixed income. The recent climb in oil and fuel costs has been accompanied by a bond market decline, both of which have emerged as sources of concern over the past few months.
The University of Michigan’s survey, which dates back to its 74-year history, saw consumer sentiment fall last month near its lowest level ever recorded. The labor market, however, has remained solid thus far this year despite those pressures.
An analysis by financial services firm Raymond James of Bureau of Labor Statistics data found that the U.S. created an average of roughly 80,000 jobs per month across the first eight months of this year. That rate surpassed Raymond James’ forecast of 70,000 jobs added each month during that stretch.
The conflict with Iran pushed gasoline prices up and sent inflation to a three-year peak. Even though inflation cooled during the summer months, ongoing fighting has kept price gains well above where they stood before the war began.
As of August, the latest month for which data is available, the annual inflation rate sits at 3.4%, placing it more than a percentage point above the Federal Reserve’s target rate of 2%.
The Fed’s Response
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 peg 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.
When the benchmark interest rate rises, borrowing becomes more costly for individuals and companies alike, and the idea is that this will push down prices by cooling economic activity and cutting demand. The move carries the risk of reduced hiring and a higher jobless rate, even if those effects tend to arrive only after a delay of several months.
How the Economy Is Holding Up
Growth in gross domestic product continued over the three-month stretch ending in June, which contradicts concern about an economic slowdown caused 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.
The Road Ahead
It will take months for the Fed’s rate increase to work its way through to hiring decisions. Until then, the higher borrowing costs could slow down hiring and cause the unemployment rate to rise.
| Month | Jobs Added |
|---|---|
| August | 162,000 |
| September | 29,000 |
| 12-month average | 45,000 |
The difference between what was expected in September’s actual result and economists’ and the current figure of 84,000 demonstrates just how fast expectations have changed. Now the real issue is whether the job market can continue adding workers steadily even as prices stay above the goal.
Despite rising prices and bond-market jitters, the economy has held firm. The Fed’s move, however, comes with risk. Higher borrowing costs could curb hiring and lift the unemployment rate.
While inflation remains stubbornly high, the numbers show the economy continuing to advance, and the central bank has already acted.
Source material: “Hiring in September grew much less than expected, jobs report shows,” ABC13 Houston.
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