A pronounced slowdown in the US labor market brought relief to US stock markets. The latest monthly report from the US Bureau of Labor Statistics for September 2026 showed a clear cooling with only 29,000 nonfarm jobs created. As economists had previously expected 80,000 to 90,000 new jobs, the figures came in far weaker than anticipated. At the same time, significant downward revisions to prior months caused market participants to sharply scale back their expectations for future interest rate hikes by the Federal Reserve.
Disappointing job data and downward revisions to prior months
In addition to the subdued employment growth in September, the overall picture was weighed down above all by the significant revisions to prior months. A total of 60,000 jobs were cut from the July and August figures. The July 2026 number was revised from an initial +21,000 to a net loss of 10,000 jobs, while August job growth was adjusted down from +162,000 to +133,000. The unemployment rate edged up from 4.1% in August to 4.2% in September. At the same time, average hourly wages slowed to 3.0% year on year, the smallest increase since May 2021. Job gains were seen mainly in health care (+17,000) and construction (+11,000), while the financial sector lost 7,000 jobs.
Market reaction: tech stocks lead the rally
The labor market report triggered a positive response in US stock markets. The tech-heavy Nasdaq Composite rose 1.2% and reached a new all-time high during trading. The broad S&P 500 gained 0.7%, while the Dow Jones Industrial Average advanced 0.5%. In the bond market, the yield on the benchmark 10-year US Treasury note fell from 5.24% the previous day to 5.17%. The probability of another Fed rate hike at the upcoming October meeting, which had been estimated at just under 70% beforehand after high energy prices, suddenly dropped on the futures market to around 21% to 22%. Most investors now expect a pause in rates.
