The September jobs report showed US employers added only 29,000 positions last month, far below forecasts, while the unemployment rate rose to 4.2%. The Labor Department released the data on Friday, October 2, 2026. Wall Street cheered the weak reading because it lowered the odds of another Federal Reserve rate increase this month.
What Happened
Economists polled by Dow Jones had expected payrolls to grow by 84,000 and the unemployment rate to hold at 4.1%. Instead, hiring slowed sharply, and the jobless rate edged higher.
The government also lowered its estimates for the previous two months by a combined 60,000 jobs, according to Charles Schwab. August’s gain was cut from 162,000 to 133,000. July’s reading swung from a gain of 21,000 to a loss of 10,000. As a result, the three-month average fell to roughly 50,000 jobs, down from about 71,000.
Stocks rose in response. Treasury yields dropped at first, then recovered part of the move later in the session.
Why the September Jobs Report Matters
The report landed while the Fed weighs whether to raise rates again. Fed officials meet on October 27 and 28. Before the data, markets had priced a high chance of a hike. Schwab said the odds, as measured by the CME FedWatch tool, fell from about 70% earlier in the week to 14%. TheStreet later put the figure near 18%, with an 81% chance that the Fed holds its range of 3.75% to 4%.
Bill Adams, chief US economist at Fifth Third Commercial Bank, said the report was not weak enough to pull the Fed’s attention away from inflation. He noted that the late-October decision remains genuinely open. In his view, the September consumer and producer price reports, geopolitical developments and fuel prices will all influence the outcome.
Adams also addressed artificial intelligence. He said the evidence of its effect on hiring is mixed: employment is falling in industries that adopt AI aggressively, while jobs for the technical workers who build it keep rising.
Key Details
● Household survey: It showed a gain of 406,000 in September, and labor force participation rose.
● Unemployment: Adams said the rate rose because more people entered the labor force, while the broader underemployment measure edged lower.
● Sectors: Health care was the only area with a significant gain. Manufacturing rose slightly. Financial activities lost 7,000 jobs.
● Wages: Average pay growth was only 0.1% for the month, against an expected 0.3%, Schwab said.
Schwab’s Collin Martin said the household figures softened the blow, and that falling yields reflect less pressure on the Fed to tighten aggressively.
Broader Context
The jobs data arrived after a turbulent week in bond markets. Reuters reported that Treasury yields had climbed to their highest levels in more than two decades earlier in the week, driven by inflation and debt worries across developed economies. The dollar index also rose above 102 on Thursday, its highest level since April 2025, Schwab said.
Friday’s close showed how the data reshaped trading. The Dow Jones Industrial Average gained about 250 points to finish near 51,177, according to CNBC. The S&P 500 rose about 0.7% to roughly 7,722, and the Nasdaq Composite advanced about 1.2% to near 27,191. The Nasdaq touched a record intraday high before yields reversed higher and pulled stocks off the peak.
The 10-year Treasury yield briefly fell to 5.18% after the report, then climbed back to roughly 5.25%. The 30-year yield stood near 5.63%. TheStreet reported that the S&P 500 finished the week essentially flat. CNBC said the Dow was down about 1.3% for the week.
Nvidia added to the tech rally. TheStreet reported that the chipmaker reached a record intraday high of $5.7 trillion.
Inflation data earlier in the week gave investors some relief. TheStreet reported that the PCE price reading released on September 30 landed below expectations. Schwab also noted that August personal spending was strong, which suggests consumers are still spending despite weak sentiment.
What Happens Next
Next week brings a lighter economic calendar. The Institute for Supply Management’s services survey arrives on Monday, October 5, and preliminary University of Michigan consumer sentiment follows on Friday, October 9. Several Treasury auctions will also test investor demand for US debt at high yields.
Third-quarter earnings season then begins in earnest. The next major tests for the Fed come with the September inflation reports and the October 27–28 policy meeting. Until then, traders will weigh a softer labor market against persistent price pressures.
