U.S. Labor Market Slams the Brakes: Nonfarm Payrolls Come in Far Below Expectations at 29,000
September nonfarm payrolls came in at just 29,000 versus expectations of 90,000, while the unemployment rate rose to 4.2%. The weak data significantly reduced the possibility of another Fed rate hike at its October meeting.
The U.S. Bureau of Labor Statistics (BLS), under the U.S. Department of Labor, released the September employment report at 15:30 TRT. According to the report, the U.S. economy added 29,000 jobs in September, well below the market expectation of 90,000. In a Dow Jones survey, economists had expected an increase of 84,000 jobs, an unemployment rate holding steady at 4.1%, and annual wage growth of 3.1%.
Unemployment Rate Rose Unexpectedly
Contrary to expectations, the unemployment rate also rose from 4.1% to 4.2%. Wage pressures remained limited, with average hourly earnings for private-sector workers increasing by just 5 cents in September, while the average workweek remained unchanged at 34.4 hours.
Revisions Made the Picture Even Weaker
The revisions were the most notable part of the data. The August job gain, initially reported at 162,000, was revised down to 133,000. The July figure was also revised further into negative territory to -10,000. Economists have warned that the unexpectedly strong increase in August may have been driven by seasonal effects that overstated hiring.
Sector Breakdown
The healthcare sector continued to increase employment with a gain of 17,000 jobs, although the pace remained below normal. Construction added 11,000 jobs, while manufacturing recorded a limited increase of 9,000.
Fed Expectations Changed Rapidly
The Fed raised its policy rate by 25 basis points last month, bringing it to a range of 3.75%-4.00%. This was the first rate hike in more than three years. Following the weak employment data, market pricing changed significantly, with expectations for a rate hike at this month's meeting falling as low as 12%. Economist Mohamed El-Erian also assessed that labor demand was weak across the board and that the data would push the Fed to wait in October.
Treasury Yields Fell Sharply
The bond market delivered the fastest reaction to the data. The 2-year U.S. Treasury yield, the maturity most sensitive to Fed expectations, fell 7 basis points to 4.716%, while the 10-year Treasury yield declined 6 basis points to 5.176%. The decline came after a global bond sell-off during the week in which the 30-year Treasury yield reached its highest level in 24 years. The weak data triggered a recovery in stocks and bonds, while spot gold also gained approximately 1%.
What Does This Mean for the Crypto Market?
The crypto market was already trading positively ahead of the data. Bitcoin was trading above $86,000 before the release, up 3.4% over 24 hours. Expectations that weak employment data would push the Fed to keep interest rates unchanged and support risk assets, including Bitcoin, had already begun to be priced into the market.
Falling Treasury yields and reduced rate-hike expectations are creating a supportive environment for crypto and equity markets in the short term. However, the fact that the Fed's focus has shifted more toward inflation than employment should not be overlooked. If inflation data continues to come in high, the possibility that the Fed will maintain its tight stance despite weak employment will remain on the table. Therefore, the upcoming inflation data will be decisive for the market's direction ahead of the October meeting.
The next employment report will be released on Friday, November 6, 2026.