Weak US jobs data fuels bets the Fed will hold off on another rate hike

Analysts say September’s soft US jobs report eases pressure on the Federal Reserve to raise interest rates again, though views differ on how much it changes the outlook.

The US economy added 29,000 jobs in September, while the unemployment rate was little changed at 4.2%, according to the Bureau of Labor Statistics. July payrolls were revised down to a loss of 10,000 from a gain of 21,000, and August was cut to 133,000 from 162,000, leaving employment 60,000 lower across the two months. Wall Street opened higher on the news.

Jamie Cox, Managing Partner at Harris Financial Group, said there is now “zero chance” of an October rate hike. He added that September should have been a hold, since outside of energy the inflation impulse is lower.

Bill Adams, Chief US Economist at Fifth Third Commercial Bank, was more cautious. He called the report mediocre but not bad enough to shift the Fed’s focus from inflation. “For the Fed, the mediocre September jobs report wasn’t weak enough to shift their focus away from inflation. The September CPI and PPI reports, prices at the pump, and geopolitical developments between now and when the Fed meets next in late October have more power to sway the next rate decision than this jobs report.”

Adams noted payrolls averaged 51,000 a month in the third quarter. That pace remains near the top of estimates for the “breakeven rate” needed to hold unemployment steady. The labor force participation rate rose to 61.8% from 61.6% in August, while the broader U-6 measure edged down to 7.6%, its lowest since January 2025.

Wages were a weak spot. Average hourly earnings posted their smallest annual gain since the post-pandemic recovery began, even as the Cleveland Fed estimates CPI rose 0.5% on the month and 3.6% on the year.

Jeffrey Roach, Chief Economist at LPL Financial, said hiring is concentrated in goods-producing industries such as construction and manufacturing, alongside healthcare. Information, financial services and government weighed on growth.

“We are seeing the tension between the goods-producing sectors that support the AI boom and the services-producing sectors that are feeling the impact of technological change,” Roach wrote.

“Given the overall softness of the labor market, the likelihood of two Fed hikes is getting lower.”