US job growth slows sharply in September; unemployment rate rises to 4.2% - Key highlights here

US job growth slowed more than expected in September and the nonfarm payrolls count for the prior two months was revised sharply lower, almost taking another interest rate hike from the Federal Reserve this month off the table.September's job growth was weaker than anticipated, adding only 29,000 nonfarm jobs. The unemployment rate increased to 4.2%.The Labor Department's closely watched employment report on Friday also showed the unemployment rate increased to 4.2% last month from 4.1% in August as more people entered the workforce. The sharp moderation in job growth likely does not mark a sudden deterioration in labor market conditions.Labor Market Faces Headwinds as US Job Growth Weakens Amid Rising UnemploymentEconomists noted that payrolls have a tendency to underperform when the Labor Day holiday falls relatively late in September, as was the case this year. There have been no signs of a broad increase in layoffs. First-time applications for unemployment benefits have been hovering at 57-year lows amid robust corporate profit growth and resilient domestic demand.Economists said the report reaffirmed the labor market's "low-hire, low-fire" state and likely had no impact on near-term monetary policy, with inflation remaining the key focus."This is a disappointing jobs report and a reminder that the low-hire, low-fire labor market never went away," said Olu Sonola, head of US economics at Fitch Ratings. "Weak job growth, a slightly higher unemployment rate, contained wage gains and downward revisions to earlier payroll estimates give the Fed little reason to keep an October rate hike on the table. But CPI remains the report that matters most."Nonfarm payrolls increased by 29,000 jobs last month after a downwardly revised rise of 133,000 in August, the Labor Department's Bureau of Labor Statistics said. Economists polled by Reuters had forecast payrolls would advance by 90,000 after a previously reported surge of 162,000 in August. Estimates ranged from as low as 35,000 to as high as 180,000.The data for July was revised to show the economy shed 10,000 jobs, the second time this year that payrolls turned negative.All told, the economy added 60,000 fewer jobs in July and August than previously estimated. Volatility linked to the model the government uses to strip out seasonal fluctuations from the data likely accounted for both the meager payroll gains last month and the downward revision to the count for August.Economists, however, said they expected growing headwinds from the US-Israel war with Iran, including high energy prices and strained supply chains, would start disrupting the labor market by the end of this year and into 2027.Diesel prices are at record highs and could start to exert pressure beyond the transportation and agricultural sectors. Ongoing tariffs also are a source of concern, with an Institute for Supply Management survey on Thursday showing rising anxiety among manufacturers over the trade war with Canada.HEALTHCARE PAYROLLS RISE MARGINALLYHealthcare continued to account for the bulk of the job growth, adding 17,000 positions, a figure that was well below the average monthly gain of 33,000 in the past 12 months. Those job gains occurred in ambulatory healthcare services and at hospitals. Employment in nursing and residential care facilities dropped by 9,000 positions, which could be related to the termination of Temporary Protected Status for hundreds of thousands of Haitian immigrants.Construction payrolls increased by 11,000, while manufacturers added 9,000. Financial activities employment dropped by 7,000 positions. Despite job growth almost stalling last month, the average workweek was unchanged at 34.4 hours.