The U.S. added 29,000 jobs in September, far short of expectations, in a sign that the labor market remains steady but may not be able to deliver consistent and sizable employment gains like it did in the past.

The numbers

The jobs number missed analysts' expectations for 84,000 jobs.

Monthly employment numbers can be volatile, so investors and policymakers tend to focus on the unemployment rate, which has remained low all year.

On Friday, the Labor Department reported that the unemployment rate edged up to 4.2%. That was up from 4.1% the previous month but still at a historically low level that indicates that the labor market remains generally healthy. Economists had expected 4.1%.

What that means

The 29,000 number will seem low to anyone who remembers the job gains that routinely topped 200,000 in the years before the pandemic-much less the massive job gains that came when the economy reopened from Covid-19.

But the economy doesn't need to generate as many jobs as it used to just to keep the labor market steady. The population is aging, and an immigration clampdown has reduced growth in the supply of workers.

Still, that won't keep low job-growth numbers from making many Americans feel dissatisfied. That dynamic has also made it harder for newcomers to break into the job market, or for those who have been laid off or seeking new opportunities to find new roles.

A weaker summer

Jobs numbers for both July and August were revised down. Employers shed 10,000 jobs in July, down from a previous estimate of a gain of 21,000. August's job gain was revised to 133,000, from 162,000. Combined, revisions trimmed 60,000 jobs from the previously estimated tally for July and August.

Where jobs were gained-and lost

Healthcare employers added 17,000 jobs, although the pace of hiring slowed compared with the past year. The sector has long been a bright spot in an otherwise slow labor market. Construction employment, which has been boosted by the data-center boom, rose by 11,000. Manufacturing employment also increased slightly.

Employment fell slightly in the government, information and financial sectors.

What this means for the midterms

Friday's numbers mark the last jobs report before the midterm elections on Nov. 3. Surveys show that voters are feeling increasingly glum about the economy, which often hurts the party in power. Consumer sentiment is near historic lows, according to a University of Michigan survey. Meanwhile, a number of Americans say that jobs are hard to get.

Paycheck pain

Contributing to Americans' frustration: Pay growth for many workers is getting entirely eaten up by inflation.

Average hourly wages rose 3% in September from a year earlier, the slowest rate of increase in several years and lower than the 3.1% economists had predicted.

Consumer prices rose by an annual 3.4% in August, the latest month for which data is available.

What this means for the Fed

The Federal Reserve has shifted its focus from boosting the labor market to fighting inflation.

Last month, the Fed raised its benchmark short-term interest rate for the first time in three years, an attempt to tamp down on price growth that remains stubbornly above target. One reason behind the policy shift: The central bank decided that the job market was healthy and less in need of a stimulus.

"There's been a pretty wide-ranging set of data, including the labor markets, that the economy has strengthened," Fed Chairman Kevin Warsh said at a press conference in September.

The job market this year

Fewer large companies have been telegraphing job cuts. Layoff announcements in August hit the lowest level for that month since 2022, according to outplacement firm Challenger, Gray & Christmas. Because of a sharp drop in immigration, fewer new positions are needed to keep the unemployment rate stable.

Many companies are in "low-hire, low-fire" mode, which means they aren't eager to dump a bunch of employees, but they aren't bringing on new workers either.

The meltdown in bonds

Investors are paying attention to the jobs numbers amid a broad selloff in the bond market. Treasury yields hit the highest level in 24 years earlier this week before retreating, while mortgage rates have surged above 7%, sending many would-be home buyers to the sidelines.

The AI impact

Some economists worry about an impending artificial-intelligence job apocalypse, but so far there is no conclusive evidence that automation is killing lots of white-collar positions. Instead, massive spending on data centers has boosted the labor market.

Employers added more than 750,000 AI-related jobs such as data annotator and data-center worker in the U.S. between the beginning of 2023 until late September, according to estimates from LinkedIn. And that isn't counting construction jobs. Electricians and plumbers have seen their hours and income surge.

"There are clear signs of a positive spillover" from data-center spending into the job market, said Ruchir Sharma, U.S. economist at Nomura.

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