US job growth slows sharply to 29,000 in September

US hiring slowed to a near-crawl in September, with employers adding just 29,000 jobs in a stark sign that the American labor market is cooling much faster than expected.

The figures, released on Friday by the Bureau of Labor Statistics, fell far short of Wall Street's expectations. Economists surveyed by Dow Jones had forecast a gain of 84,000 nonfarm payrolls for the month. Instead, the sharp deceleration was accompanied by an increase in the unemployment rate, which rose to 4.2 per cent, compared to the 4.1 per cent that analysts had predicted.

The weak report marks a significant moment for the US economic outlook. For months, policymakers and investors have debated whether the Federal Reserve could successfully achieve a "soft landing"—taming inflation without triggering a severe downturn in employment. Friday’s data suggests that the labor market is losing steam rapidly, shifting the balance of risks.

Pressure on the Federal Reserve

The Federal Reserve is likely to face immediate pressure to react to the slowdown. The central bank recently shifted its primary focus from fighting inflation to protecting the labor market, having initiated a cycle of interest rate cuts. A monthly gain of only 29,000 jobs is historically weak for a growing US economy and will almost certainly fuel demands for more aggressive rate cuts at the Fed's upcoming meetings.

Lower interest rates make borrowing cheaper for businesses and consumers, which can stimulate hiring and business investment. While some central bank officials have advocated for a cautious, gradual approach to lowering rates, these figures will strengthen the arguments of those who believe the economy needs more immediate support to avoid a recession.

Unresolved details

It is not yet clear whether the September slowdown was driven by temporary disruptions, such as severe weather or strike activity, or if it represents a deeper, structural pullback in hiring across major industries. The government's initial monthly estimates are frequently revised as more complete data becomes available over the coming weeks. Economists will look closely at these future revisions to determine if September was a temporary blip or the start of a more worrying trend.

The widening gap between expectations and reality highlights how quickly economic momentum can shift. While a job gain of 84,000 would have pointed to a gentle moderation in hiring, a figure of 29,000 represents a sudden deceleration.

With the unemployment rate now sitting at 4.2 per cent, household confidence may also face a test. Consumer spending has been the primary engine of US growth, but that engine relies heavily on a job market that makes workers feel secure in their incomes.