September Jobs Report Falls Short: Economy Adds Just 29,000 Jobs

The US economy added far fewer jobs than expected in September, according to the Bureau of Labor Statistics. Nonfarm payrolls rose by just 29,000, falling short of the estimated 84,000 gain. The unemployment rate increased to 4.2%, surpassing the forecasted 4.1%. This unexpected weakness in the labor market has economists reassessing their expectations for future interest rate hikes.

Market reaction was swift, with traders interpreting the soft jobs numbers as a sign that the Federal Reserve will keep rates steady at its October meeting. Stock futures rose sharply after the release, while Treasury yields slumped due to lower inflation expectations. The market-implied odds of the Fed holding rates steady jumped to 82.8%, according to the CME Group's FedWatch tool.

Thomas Simons, chief US economist at Jefferies, said the payroll data 'should be the nail in the coffin for an October hike.' He attributed the August jobs surge to a rebound from weak hiring in June and July, rather than sustained momentum. The unemployment rate is closely watched by Fed officials, who may view it as a more accurate indicator of labor market health.