Tepid jobs report dents October Fed rate hike odds

Employers added 29,000 jobs in September, the government said yesterday. The figures were well short of the 84,000 that economists had forecast.

The weaker-than-expected report has made investors increasingly confident that the Federal Reserve will leave interest rates unchanged in October.

According to data from the Bureau of Labor Statistics, even healthcare (a typically reliable source of job growth) added just 17,000 workers, about half its average monthly gain of 33,000 over the past year.

Construction and manufacturing posted modest gains of 11,000 and 9,000, respectively.

Meanwhile, AI-exposed sectors, including information and business services, saw employment decline.

Unemployment climbed slightly to 4.2% last month, up from 4.1%, but remains low by historical measures.

Wage growth also weakened, slowing to 3% year over year last month—the lowest rate since the pandemic—while pay continues to trail inflation.

What does this mean for the Fed?
Economists note that while the labor market has not deteriorated sharply, a weak jobs report gives policymakers reason to wait and monitor economic data before acting.

According to CME’s FedWatch tool, expectations for a 25-basis-point rate hike in October have fallen to 17%, from nearly 36% a week earlier.

The Fed had raised interest rates in September for the first time in three years.

Prediction market Kalshi shows odds falling from almost 70% last week to just 18%.