Jobs Growth Slows More Than Expected, Setting Fed up For Possible Pause in October

10:43 AM EDT, 10/02/2026 (MT Newswires) -- US job growth slowed more than projected in September, likely providing the Federal Reserve some breathing space to hold interest rates steady later this month. Total nonfarm payrolls rose by 29,000 last month, the Bureau of Labor Statistics said Friday. That's just about a third of the 90,000 increase projected in a Bloomberg-compiled survey. The increase in August was adjusted downward by 29,000 to 133,000, while July's tally turned negative. "For the Fed, this number should be the nail in the coffin for an October hike," Jefferies Chief US Economist Thomas Simons said in a note e-mailed to MT Newswires. "We had been expecting that they would continue with successive 25 (basis-point) moves, but it now looks more likely that the policymakers emphasizing that they have some more time before another hike is needed will remain patient." Earlier this week, New York Fed President John Williams said he expected monetary policy to get tighter, though he saw no urgency to act. Last month, the Federal Open Market Committee raised interest rates by 25 basis points, its first hike in just over three years, to combat inflation running persistently above its 2% target. The central bank's so-called "dot plot" signaled that a further rate increase could happen later this year. Markets are now pricing in an 82% probability that the FOMC will leave its benchmark lending rate unchanged toward the end of this month, up from 76% on Thursday and 36% a week ago, according to the CME FedWatch tool. The odds in favor of a second consecutive 25-basis-point hike eased to 18% from 24% on Thursday and 64% a week earlier. "From the Fed's standpoint, this was a goldilocks employment report," Thomas Feltmate, senior economist at TD Economics, said in a report. "While job growth moderated relative to August, the three-month moving average suggests hiring is still running close to the breakeven rate." The FOMC is scheduled to announce its next policy decision on Oct. 28. The unemployment rate ticked up to 4.2% in September from the prior month's 4.1%, while Wall Street projected an unchanged print. Private payrolls growth slowed to 46,000 from 89,000 in August, falling short of the Street's forecast of 81,000. The goods-producing sector added 18,000 jobs, while employment in the service industry rose by 28,000, both reflecting a slower pace of job creation on a monthly basis. Data on Wednesday showed the Fed's preferred inflation metric came in softer than expected in August, with the headline personal consumption expenditure price index rising 3.4% year over year. On Thursday, outplacement firm Challenger Gray & Christmas said US job cut announcements fell to the lowest total for the month of September in four years as employers adopted a "wait-and-see" stance amid macro uncertainty. Earlier this week, payrolls processing firm ADP (ADP) said US private sector employment rebounded in September as payrolls expanded at a faster pace following three months of slowing growth. Price: 260.00, Change: -3.96, Percent Change: -1.50