Employers, facing economic pressure, added just 29,000 jobs in September

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So much for a September surge.

August’s unexpected yet strong job growth was not matched in September, according to the latest jobs report from the Bureau of Labor Statistics. Payroll gains were quite meager in September, coming in well below analysts’ expectations, as myriad economic challenges likely had employers pumping the brakes on hiring.

Diving into the data. Employers added just 29,000 jobs in September, around two-thirds of the average monthly gains of 45,000 over the last year. Downward revisions for prior months now estimate that the labor market lost 10,000 jobs in July, and while adding 133,000 in August.

“The labor market is quite a bit softer than what we were expecting to walk into this morning,” Nicole Bachaud, labor economist at ZipRecruiter, told HR Brew.

September’s weak payroll growth likely stems from multiple factors fueling economic anxiety for businesses. The ongoing US-Israeli war with Iran has increased energy and oil costs, which in turn will soon spike the costs of most consumer goods, likely impacting spending and hurting businesses’ bottom lines. In addition, rising inflation and an interest rate hike from the Fed in mid-September (which was anticipated) may have dissuaded companies from growing, in turn preventing them from hiring more staff, experts told us.

“All of that leads to more expensive borrowing costs, and that’s leading to some hesitations from employers,” Bachaud said.

The sectors that did see growth include those with primarily highly-skilled, hands-on roles. Healthcare added 17,000 jobs in September, primarily in ambulatory care and hospitals, though growth was still weaker than the average 33,000 average monthly gains seen over the last year. Construction added 11,000 jobs, above its 12-month average monthly gains of 10,000, and manufacturing added 9,000 jobs, and is up 72,000 from December 2025.

Meanwhile, several traditionally white-collar industries reported payroll declines month over month, including information, financial activities, and professional and business services. Many jobs in these fields are highly exposed to AI and other automation technology, and employers are likely holding back on hiring as they figure out what responsibilities and competencies will be most important as these roles change.

“There is automation that is displacing jobs,” Raj Namboothiry, head of ManpowerUS, told HR Brew. “And I think changing skill requirements is also attributing to dynamic shifts happening in the labor market.”

While employers treaded with caution in September, workers were seemingly optimistic. The labor participation rate rose slightly to 61.8%, suggesting more people returned to the labor force during that period. As such, the unemployment rate rose to 4.2% in September, from 4.1% in August, which experts said is likely the result of more people looking for work than employers shedding jobs.

“There is this pent up demand for people to show up and get back to work if those opportunities are there,” Bachaud said. Given that those opportunities weren’t there, there’s a chance that labor force participation may dwindle again in future months, she cautioned, “but I think it’s interesting to see that you know workers were pretty optimistic and hopeful that things were going to turn around.”

Zoom out. Hiring will likely continue to slow through the rest of 2026 due to economic pressures, according to Bachaud. However, employers shouldn’t move slowly with their talent strategies just because fewer hires are being made right now. Despite labor participation ticking back up, the labor force is shrinking, as fertility and immigration rates decline. Employers have to be prepared for that.

“If tomorrow all of a sudden hiring picked up full speed ahead, it would become apparent very quickly that we do not have enough workers to sustain that level of growth that we’ve been used to seeing in the US,” Bachaud said. “For employers, be ready if things do improve quickly…If you stay ready, you don’t have to get ready.”

HR and TA teams should think outside of the box when it comes to hiring and developing talent. That includes understanding the most important skills the business will need not just today but in the future, considering candidates from different industries or backgrounds, and being willing to develop external and internal talent to fill roles needed in the short and long term, both Bachaud and Namboothiry said.

“You have to manage today’s costs while building the skills for tomorrow’s business,” Namboothiry said. “That is where I think employers have to start to widen their talent pool. Hiring for potential, training for proficiency, training, upskilling—that is going to be a part and parcel of how they should be operating.”