The US labour market delivered a significantly weaker employment report in September, with nonfarm payroll growth falling well short of expectations while the unemployment rate increased and wage growth slowed.

The US economy added just 29,000 jobs in September 2026, compared with market expectations for 90,000 and following a downwardly revised increase of 133,000 in August.

At the same time, the unemployment rate rose to 4.2% from 4.1%, slightly above expectations.

The combination of weak payroll growth, softer wage gains and a higher unemployment rate provides a more cautious picture of the US labour market heading into the final quarter of the year.

For financial markets, the report is particularly important because weaker employment growth could influence expectations around the Federal Reserve’s interest-rate path and the direction of US Treasury yields and the dollar.

Market Snapshot

Market Factor	September 2026	Previous / Expected	What Traders Are Watching
Nonfarm payrolls	+29K	+133K Aug / +90K expected	Labour-market momentum
Unemployment rate	4.2%	4.1% Aug / 4.1% expected	Signs of labour-market weakening
Unemployed	7.11M	+78K	Available labour supply
Total employment	163.15M	+406K	Employment growth
Labour force	170.26M	+485K	Participation
Labour force participation	61.8%	61.6%	Workforce engagement
Employment-population ratio	59.2%	Higher	Employment utilisation
U-6 unemployment	7.6%	7.7%	Broader labour-market conditions
Average hourly earnings	$37.81	+0.1% MoM	Wage pressure
Annual wage growth	3.0%	3.1% Aug / 3.2% expected	Inflation pressure

US Payroll Growth Collapses Below Forecast

The headline employment figure was the biggest surprise in the September report.

The US economy added just 29,000 jobs, dramatically below the 90,000 expected by markets.

August employment was also revised lower to 133,000.

The July figure was revised down by 31,000 to a decline of 10,000 jobs.

After the latest revisions, employment across July and August combined was 60,000 lower than previously reported.

The revisions are important because they suggest that the recent slowdown in employment growth has been more pronounced than earlier estimates indicated.

Unemployment Rate Rises to 4.2%

The unemployment rate increased to 4.2% in September, up from 4.1% in August and slightly above the 4.1% market forecast.

The number of unemployed people increased by 78,000 to 7.11 million.

However, the increase in unemployment occurred alongside a significant expansion in the labour force.

The labour force increased by 485,000 to 170.26 million, while total employment surged by 406,000 to 163.15 million.

This means the rise in the unemployment rate was partly driven by more people entering the labour market.

Labour Force Participation Increases

The labour force participation rate increased to 61.8% from 61.6%.

The increase indicates that a larger share of the population was either working or actively looking for work.

The employment-to-population ratio also edged higher to 59.2%.

This creates an important distinction within the report.

While payroll employment growth was extremely weak, the household survey showed a substantial increase in employment and labour-force participation.

Traders will therefore be watching whether the stronger household-survey numbers are sustained in coming months.

U-6 Unemployment Rate Falls

The broader U-6 measure of unemployment, which includes unemployed workers as well as underemployed and marginally attached workers, eased to 7.6% from 7.7%.

The decline provides a more positive element within an otherwise soft employment report.

It suggests that broader measures of labour-market underutilisation did not deteriorate alongside the rise in the headline unemployment rate.

US Wage Growth Slows Sharply

Wage growth provided another important signal for markets.

Average hourly earnings for all employees on private nonfarm payrolls increased by just 5 cents, or 0.1%, to $37.81 in September.

That followed a 0.3% increase in August and was below the market expectation of 0.3%.

Annual wage growth also slowed.

Average hourly earnings increased 3.0% over the past 12 months, down from 3.1% in August and below the 3.2% expected by markets.

The 3.0% annual increase was the slowest since May 2021.

Slower Wages Could Ease Inflation Pressure

The moderation in wage growth is particularly important for monetary policy.

Slower wage gains can reduce some of the underlying pressure on services inflation and household income growth.

The latest figures therefore provide the Federal Reserve with another indication that labour-market conditions may be cooling.

However, policymakers will need to assess the employment report alongside inflation, consumer spending and broader economic activity before determining the appropriate policy response.

Production and Nonsupervisory Worker Pay

Average hourly earnings for private-sector production and nonsupervisory employees increased by 7 cents, or 0.2%, to $32.60.

That was stronger than the monthly increase for all private-sector employees but still represents relatively modest wage growth.

The broader trend remains one of slower annual wage increases.

Employment by Sector

The employment gains that did occur were concentrated in a limited number of industries.

Health care added 17,000 jobs, including 13,000 in ambulatory health care services and 12,000 in hospitals.

Construction employment increased by 11,000.

Manufacturing added 9,000 jobs, with plastics and rubber products and machinery providing much of the increase.

Financial activities recorded a decline of 7,000 jobs.

Employment showed little change across a broad range of other industries, including:

• Mining, quarrying and oil and gas extraction
• Wholesale trade
• Retail trade
• Transportation and warehousing
• Information
• Professional and business services
• Social assistance
• Leisure and hospitality
• Other services
• Government

The breadth of the weakness is notable because relatively few sectors generated significant employment gains.

Bullish Sentiment

1. Labour force participation increased

Participation rose to 61.8% from 61.6%.

2. Total household employment increased

Employment rose by 406,000 in September.

3. U-6 unemployment declined

The broader unemployment measure fell to 7.6% from 7.7%.

4. Health care continued to add jobs

Health care employment increased by 17,000.

5. Construction and manufacturing remained positive

Construction added 11,000 jobs and manufacturing added 9,000.

Bearish Sentiment

1. Payroll growth dramatically missed forecasts

The economy added only 29,000 jobs against expectations of 90,000.

2. Previous employment figures were revised lower

July and August employment was revised down, reducing combined employment growth by 60,000 compared with previous estimates.

3. Unemployment increased

The unemployment rate rose to 4.2%.

4. Wage growth slowed

Annual wage growth fell to 3.0%, the slowest pace since May 2021.

5. Employment gains were narrow

Most major industries recorded little change in employment.

US Dollar and Fed Outlook

The employment report creates a new test for the US dollar and Federal Reserve expectations.

The combination of weak payroll growth, a higher unemployment rate and slower wage growth could lead markets to reassess the outlook for US interest rates.

Lower expectations for future rate increases could reduce support for the dollar and put downward pressure on Treasury yields.

However, the rise in labour-force participation and increase in household employment provide some counterbalancing evidence.

The Federal Reserve will therefore have to assess whether the payroll weakness represents a temporary slowdown or a broader deterioration in labour-market conditions.

US Employment Outlook: What Traders Are Watching

The September report shifts attention toward whether the US labour market is entering a more pronounced cooling phase.

Payroll growth of just 29,000 is significantly below the 90,000 forecast, while downward revisions to July and August employment show that previous estimates overstated the strength of job creation.

At the same time, the unemployment rate has risen to 4.2% and annual wage growth has slowed to 3.0%.

The next employment reports will be critical in determining whether September represents an isolated weak month or part of a broader trend.

Markets will also be watching inflation data closely because the combination of weaker employment and softer wage growth could alter expectations for the Federal Reserve’s policy path.

Economic Outlook

The September employment data points to a cooling US labour market, although the picture is not uniformly weak.

Payroll employment growth slowed sharply, but household employment increased by 406,000 and labour-force participation rose.

The unemployment rate nevertheless increased as more workers entered the labour market.

The slowdown in wage growth is another important development.

Annual earnings growth of 3.0% is considerably below the recent pace and could reduce some of the inflation pressure associated with a tight labour market.

The key question for the economy is whether slower employment growth eventually feeds through to consumer spending and broader economic activity.

Demand Outlook

The labour market remains critical to the outlook for US consumer demand.

Employment growth and wage gains determine household income and therefore influence spending across the economy.

If payroll growth remains weak and wage growth continues to slow, household purchasing power could moderate.

However, the increase in total household employment and labour-force participation provides evidence that labour-market engagement remains relatively strong.

Future consumer spending data will therefore be important in determining how much of the employment slowdown is feeding into the broader economy.

Currency Hedger View

For businesses exposed to U.S. dollar transactions, the employment report can have a direct impact on currency markets and the effective cost of cross-border payments.

Changes in Federal Reserve expectations can quickly influence the U.S. dollar, Treasury yields and major currency pairs.

Businesses with USD exposure should therefore monitor the relationship between U.S. employment data, wage growth, inflation expectations and Federal Reserve policy.

Currency Hedger helps businesses manage international currency exposure alongside changing market conditions, allowing companies to consider both the underlying transaction value and the FX component of cross-border payments.

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Coming Sessions

The next market catalysts will focus on whether the September labour-market slowdown is confirmed by additional economic data.

Traders will be watching:

• US inflation data
• US consumer spending
• Initial jobless claims
• Continuing jobless claims
• Further labour-market data
• Federal Reserve communications
• US Treasury yields
• US dollar movements
• Wage growth
• Consumer confidence
• Business activity indicators

A continued moderation in employment and wages could increase attention on potential changes to the Federal Reserve’s policy stance.

Stronger economic data, meanwhile, could reduce the significance of the September payroll miss.

Today Markets View

The September US employment report delivered a clear slowdown in headline payroll growth.

The economy added just 29,000 jobs, well below the 90,000 forecast, while July and August employment were revised lower. The combined revisions reduced employment growth for those two months by 60,000 compared with previous estimates.

The unemployment rate also increased to 4.2%, while annual wage growth slowed to 3.0%, its weakest pace since May 2021.

However, the household survey provided some contrasting signals. Total employment increased by 406,000, the labour force expanded by 485,000 and participation rose to 61.8%.

The report therefore points to a labour market that is losing momentum, while still attracting more workers.

For financial markets, the key issue will be whether the weakness in payroll growth and wage inflation changes expectations for Federal Reserve policy.

The next round of inflation and labour-market data will be critical in determining whether September marks a broader shift in the US employment cycle.

Analysis Louis Roche – Today Markets

Currency Hedger

For businesses buying or selling internationally, currency movements can have a direct impact on the effective cost of physical commodity and commercial transactions.

Currency Hedger helps businesses manage international currency exposure alongside changing market conditions, allowing companies to consider both the underlying transaction value and the FX component of cross-border payments.

Open a Currency Hedger Account

Learn more about Currency Hedger

General market information and analysis provided by Octalas Group on behalf of Today Markets and Currency Hedger. This material is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any financial instrument.