MarketsOCT 04, 2026

September payrolls miss at 29,000 pulls 10-year yield to 5.17%, cuts October hike odds

Nonfarm payrolls undershot the 84,000 consensus by 55,000 and July flipped to a loss, pushing CME FedWatch odds of an October hold to 82.8%.

BY HENLEY MARRAST · MARKETS DESK

The US economy added 29,000 nonfarm payrolls in September, the Bureau of Labor Statistics reported Friday, missing the Dow Jones consensus of 84,000 by 55,000 jobs and flipping July’s print to a 10,000-job loss after revisions subtracted a combined 60,000 from July and August. Unemployment ticked to 4.2% from 4.1%. Twelve-month average monthly gains now sit at 45,000, a number more consistent with a stalling labor market than a soft landing.

Rates markets reacted immediately. The 10-year Treasury constant-maturity yield stood at 5.24% on October 1 per the Fed’s H.15 release, down from a 5.29% high recorded September 30, and traded at 5.18% intraday Friday per Schwab. CME FedWatch now assigns 82.8% odds to the FOMC holding steady at its October 27–28 meeting, a sharp repricing from the trajectory implied by September’s 25 bps hike to 3.75–4.00%.

“For the Fed, this number should be the nail in the coffin for an October hike,” Jefferies chief US economist Thomas Simons wrote in a note cited by CNBC. Collin Martin of the Schwab Center for Financial Research said the data “takes the pressure off the Fed to hike aggressively.” Equities took the hint quietly: the S&P 500 closed at 7,666.45, up 0.19%, per Schwab.

The disinflation side of the ledger reinforced the pause case. Average hourly earnings rose 0.1% on the month and 3.0% year over year, which CNBC noted is the slowest annual pace since May 2021. Composition told its own story. Health care added 17,000 jobs against a 33,000 trailing average, and government payrolls fell 17,000. The miss was broad rather than concentrated in a single rate-sensitive sector, which is precisely what makes it legible to the Fed as macro signal rather than seasonal noise.

The window has a defined expiration. A hot October CPI print, or any hawkish framing out of the FOMC meeting itself, resets the entire curve. Until then, the market has decided the hiking cycle paused in September, whether or not Jerome Powell is ready to say so.

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About the author

Henley Marrast

MARKETS DESK

Henley Marrast covers AI-equity flow, accelerator demand, and earnings prints for AI Sheet Report. She leads coverage of the public AI complex from the New York markets desk, with a focus on the daily tape and quarterly results. She has been writing about technology markets for several years.