US JOBS5 min read
US hiring stalls at 29,000 as Fed hike bets fade
Payrolls rose just 29,000 in September against about 84,000 expected and unemployment ticked up to 4.2%, cutting the odds of an October Fed hike to about 17%.
US payrolls rose just 29,000 in September against about 84,000 expected, July and August were revised down by a combined 60,000, and unemployment rose to 4.2%.
Traders cut the odds of an October Fed hike to about 17%, from about 36% a week earlier. Yields fell at first, then reversed, while tech stocks rallied to records.
Watch the Fed on 28 October and whether officials keep a year-end hike in their guidance, then inflation, the long end and next month’s revisions.
The trader’s angle
With the Fed hiking into war-driven inflation, every jobs report now moves Fed bets, Treasury yields and tech stocks within minutes.
The chart
The US 2-year yield, which tracks expected Fed rates, over the past year.
US 2Y
Nonfarm payrolls, September
+29,000
downvs ~84,000 expectedJuly and August were revised down by a combined 60,000; July now shows a loss of 10,000 jobs.
Unemployment rate
4.2%
up+0.1pt from 4.1%Up largely because more people joined the labour force: participation rose to 61.8%, its highest since May.
Odds of an October Fed hike
~17%
downfrom ~36% a week earlierCME FedWatch after the report. The Fed's next decision is on 28 October.
2-year Treasury yield
~4.82%
up+3bp, early afternoon NYFell about 6bp to roughly 4.73% straight after the report, then reversed. An intraday snapshot, not a close.
Before every report, economists publish forecasts and traders position around the consensus — this time about 84,000 new jobs. By the time the data lands, the expected part is already in prices. What moves markets is the gap between the forecast and the print, plus the details: revisions to earlier months and the unemployment rate.
The first place traders look is the 2-year , which tracks where the Fed’s is expected to go. The odds of a hike or a hold come from : CME’s FedWatch tool turns their prices into probabilities for each Fed meeting.
What happened
America’s jobs engine all but stalled in September. Employers added just 29,000 jobs, the Bureau of Labor Statistics said, far short of the roughly 84,000 economists had expected. Earlier months looked worse too: July and August were revised down by a combined 60,000, and July now shows a loss of 10,000.
The unemployment rate rose to 4.2% from 4.1%, but the reason matters. The separate household survey showed the labour force growing by 485,000 and employment by 406,000: more people started looking for work than found it. The , the share of adults working or looking for work, rose to 61.8%, its highest since May. That is a less alarming source of higher unemployment than job losses.
Traders cut the odds of a Fed hike on 28 October to about 17%, from about 36% a week earlier, according to CME FedWatch. yields fell at first, then reversed: by early afternoon in New York the 10-year was up about at roughly 5.26%.
Stocks rose but came off their highs as yields rebounded. The S&P 500 was up about 0.7% and the Nasdaq Composite about 1.2%, after the Nasdaq touched an all-time high.
The backstory
The report landed at a delicate moment for the Federal Reserve. On 16 September, under Chair Kevin Warsh, it raised rates by 25bp to a 3.75%–4.00% target range — its first hike in more than three years, aimed at inflation that picked up after the war with Iran began. The vote was unanimous, 12–0, and officials’ projections showed one more hike before the end of the year.
That makes the jobs market the strongest argument against tightening further, and inflation has lately given the , those wary of more hikes, some help too. The Fed’s preferred gauge, , rose 3.0% in the year to August, below the 3.3% expected. Headline PCE came in at 3.4% against 3.7% forecast. But 3.4% is still well above the Fed’s 2% target — and long-dated Treasury yields touched their highest level since 2002 this week.
How it ripples through markets
From a jobs miss to record tech stocks — and back
- 1
Hiring stalls
Payrolls rise just 29,000 against about 84,000 expected, and July and August are revised down by a combined 60,000.
- 2
Fed hike bets fade
downOctober hike oddsA cooler jobs market means less pressure on wages and prices, so FedWatch odds of an October hike fall to about 17%, from about 36% a week earlier.
- 3
Short-dated yields drop
down2y Treasury yieldThe 2-year Treasury yield, the most sensitive to the Fed, falls about 6bp to roughly 4.73%.
- 4
Tech rallies to records
upNasdaq CompositeA lower lifts the value of future earnings: the Nasdaq touches an all-time high and Nvidia hits its first record since May.
- 5
Yields reverse, stocks trim gains
up10y Treasury yieldYields turn, plausibly because the report isn’t uniformly weak and inflation is still well above target: by early afternoon in New York the 10-year is up about 2bp at roughly 5.26%, and stocks come off their highs as yields rebound.
Why it matters for traders
The front end reprices first. The 2-year yield is the market’s cleanest read on Fed expectations, and its first move — down about 6bp to roughly 4.73% — showed traders paring back bets on an October hike straight away.
Tech led stocks for a related reason: lower yields cut the applied to future earnings, which matters most for companies whose profits lie far ahead. Nvidia hit its first record since May, and CrowdStrike, Palo Alto Networks and AMD also set all-time highs.
The first move isn’t always the one that sticks. By early afternoon the 2-year was about 3bp higher on the day, near 4.82%, and stocks had slipped from their peaks. There are two plausible readings.
The report wasn’t uniformly weak: household employment jumped and unemployment rose mainly because more people were job-hunting. And the forces that pushed long-dated yields to 24-year highs this week — inflation well above target and energy supplies squeezed by the war — don’t change with one jobs number.
Finally, respect the revisions: they wiped 60,000 jobs off July and August, and July now shows a decline. One weak month can be noise; a weak month on top of downgraded history is much harder to dismiss.
What to watch
First, the Fed’s next decision on 28 October. Markets now see a hike at that meeting as unlikely, but traders still rate one by year-end as more likely than one in October — so listen for whether officials keep that extra hike in their .
Second, inflation. If keeps undershooting forecasts, the case for stopping strengthens; if energy prices push headline inflation higher, it weakens.
Third, the long end. The 10-year’s climb to 24-year highs this week is about inflation, energy and the as much as the Fed. If yields keep rising even on weak data, tech’s tailwind fades.
And watch the revisions. If August and September are cut again next month, today’s report will look like the start of a slowdown rather than a blip.
Academy lessons for this story
- F8Central banks and the policy rateExplain how a central bank sets interest rates, read the market’s odds of a move, and match each of its tools to a problem.
- R10What moves rates: event daysSay which news moves short-term yields and which moves long-term ones, and split a day’s move into rate expectations and everything else.
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Sources
- US Bureau of Labor Statistics — Employment Situation Summary — September 2026
- CNBC — September 2026 jobs report
- CNBC — Fed rate-hike odds decline after September jobs report
- CNBC — U.S. Treasury yields rise despite September jobs report
- CNBC — Stock market today: live updates
- NPR — Fed raises interest rates for first time in more than three years
Written by the JuniorTrader desk with AI assistance, from the reports above. Intraday levels are snapshots and may have moved since. Not investment advice.
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