American employers pulled back on hiring in September, adding only 29,000 jobs as the unemployment rate climbed to 4.2 percent, the Labor Department reported Friday. The weaker-than-expected report — paired with sharp downward revisions to the previous two months — has markets betting that the Federal Reserve will skip an interest-rate increase when it meets later this month. Nonfarm payrolls grew by 29,000 last month, the Bureau of Labor Statistics said, falling far short of the roughly 90,000 jobs that economists polled by Reuters had forecast. It marked a steep drop from August's now-revised total and a clear loss of momentum heading into the fall. The revisions told an even grimmer story about the summer. August's initially reported surge of 162,000 jobs was cut to 133,000, while July was flipped from a 21,000 gain to a 10,000 loss — the first monthly decline in the current stretch. Together, the changes wiped 60,000 jobs off the two months' totals. The department's figures are routinely adjusted as more complete employer survey data comes in. The jobless rate rose to 4.2 percent from 4.1 percent in August. The increase was driven in part by more Americans joining the workforce: the labor force participation rate edged up to 61.8 percent from 61.6 percent the month before, after sliding earlier this year. Because the unemployment rate counts people actively looking for work, an influx of new job seekers can push it higher even without a wave of layoffs. Wage growth cooled as well. Average hourly earnings for private-sector workers rose by 5 cents to $37.81 in September, up 3 percent from a year earlier — a pace that could ease pressure on inflation but also means thinner pay gains for workers. The month-over-month increase came in at just 0.1 percent. Whether paychecks kept pace with prices in September will not be known until the inflation report arrives on Oct. 14; they fell behind in both August and July. The job gains that did appear were narrow. Health care added 17,000 positions, below its 12-month average of 33,000, while construction added 11,000 and manufacturing added 9,000. On the other side, government employment fell by 17,000, information shed 10,000 jobs, and financial activities lost 7,000 — the latter down 129,000 since a recent peak in May 2025. The report landed at a delicate moment for monetary policy. The Fed raised its benchmark short-term rate by a quarter of a percentage point in September as it works to push inflation back toward its 2 percent target, and officials signaled another increase could come before year's end if the Iran war and other shocks keep prices elevated — provided the labor market holds up. Friday's data weakened that condition. Markets reacted quickly. Interest-rate futures priced in less than a one-in-five chance of a hike at the Fed's late-October meeting, down from more than one-in-four a day earlier. The CME FedWatch tool put the odds of rates holding steady in the current 3.75 to 4 percent range at 85 percent, up from 75 percent a day before. Bets on a December increase eased as well, though they remained near 90 percent. Olu Sonola, head of U.S. economics at Fitch Ratings, called the report "disappointing" and said weak job growth, a higher unemployment rate, contained wage gains and the downward revisions "give the Fed little reason to keep an October rate hike on the table" — while cautioning that the upcoming inflation data is "the report that matters most." Other analysts urged against reading too much into a single month: payrolls have a tendency to underperform when Labor Day falls late in September, as it did this year, and there has been no broad wave of layoffs, with first-time claims for unemployment benefits hovering near 57-year lows. David Doyle of Macquarie pointed to rising participation and gains in cyclical industries as evidence the market "remains healthy underneath the surface," while Morningstar senior economist Preston Caldwell said fears of deeper deterioration had been eased and the Fed would now look to other data. The Federal Open Market Committee meets Oct. 27–28. With an October hike now seen as unlikely, attention shifts to the September inflation report on Oct. 14 and to whether the labor market's slowdown stays orderly or turns sharper. A gradual cooling could help the Fed bring down inflation without damaging growth; a sharper turn would raise recession alarms.