US job growth slowed sharply in September, with employers adding 29,000 positions as the unemployment rate increased to 4.2%, according to the Bureau of Labor Statistics.
The figure fell well below economists’ expectations, while downward revisions showed the economy created 60,000 fewer jobs in July and August than previously estimated.
The report reinforced signs of a low-hiring, low-firing labor market and further reduced expectations that the Federal Reserve will raise interest rates again at its October meeting.
August payroll growth was revised down to 133,000, while July was revised to a loss of 10,000 jobs, marking the second negative payroll reading this year.
Healthcare accounted for most September hiring, adding 17,000 positions, although that was below its average monthly gain of 33,000 over the previous 12 months.
Construction added 11,000 jobs and manufacturing gained 9,000, while financial activities lost 7,000 positions.
The average workweek remained unchanged at 34.4 hours, while average hourly earnings growth slowed to 3%, its lowest rate in more than five years.
The unemployment increase came as the labor force expanded by 485,000 people, lifting participation to 61.8% from 61.6% in August.
Household employment rose by 406,000.
Financial markets reduced the implied probability of an October Federal Reserve rate increase to roughly 13% after the report, from 22% beforehand and about 69% a week earlier.
The Fed raised its benchmark overnight rate by 25 basis points last month to a range of 3.75% to 4.00%, its first increase in three years.
Inflation remains above the central bank’s 2% target, leaving economists expecting another increase in December despite September’s weaker employment figures.
Economists also cited potential labor-market pressure from high energy prices, strained supply chains and ongoing tariffs.
US stocks opened higher following the report, while the dollar weakened against a basket of currencies and Treasury yields were mostly lower.