U.S. Labor Market Cools with Modest Job Growth in September

The U.S. labor market showed signs of cooling in September, with nonfarm payroll employment rising by just 29,000 jobs. This modest gain was overshadowed by downward revisions to previous months, which erased most of August’s previously reported job growth. The unemployment rate ticked up to 4.2%, as both employment and the labor force continued to expand. The data suggests the labor market is losing momentum, with job growth slowing and unemployment edging higher.

Wage growth also continued to decelerate, with average hourly earnings increasing by 3.0% year over year in September, down from 3.1% in August. This marks the slowest pace of wage growth in 2026, with average hourly earnings reaching $37.81. The easing wage pressures come as the pace of hiring moderates, reflecting a broader slowdown in the labor market.

According to the Bureau of Labor Statistics (BLS), total nonfarm payroll employment increased by 29,000 in September, following a revised gain of 133,000 in August. Revisions to prior months subtracted 60,000 jobs from previously reported totals. Job growth in 2026 has slowed, with monthly payroll gains averaging 68,000 through September, down from 80,000 in August. Over the past 12 months, total nonfarm employment has grown by 496,000.

The unemployment rate rose to 4.2% in September from 4.1% in August, though it remains below its year-ago level of 4.4%. The labor force participation rate increased to 61.8%, marking its third consecutive monthly increase. Employment gains in September were led by health care (+17,000) and leisure and hospitality (+10,000), while declines were seen in government (-17,000) and information (-10,000).

In the construction sector, employment rose by 11,000 jobs in September, with residential construction losing 4,900 jobs and nonresidential construction adding 16,100. Residential construction employment has declined for the nineteenth consecutive month, shedding a net of 32,800 jobs over the past year. The unemployment rate for construction workers rose to 4.3% in September, up from 4.1% in August.