The US economy added just 29,000 jobs last month and the unemployment rate ticked up to 4.2%

By Alicia Wallace, CNN

(CNN) — The US labor market hit a soft patch in September as the economy added just 29,000 jobs and the unemployment rate increased to 4.2%, new Bureau of Labor Statistics data showed Friday.

The latest jobs report – and the final official employment snapshot before the midterm elections – also showed that recent months’ hiring was weaker than previously thought and that wage growth slowed, putting Americans’ paychecks further behind the 8-ball at a time when inflation has accelerated.

Through September, the economy has added an average of 68,000 jobs per month, BLS data shows. That’s stronger than last year (when fewer than 10,000 jobs were added per month); however, the current pace of hiring is running well below pre-pandemic averages.

All told, it remains a “low-hire, low-fire” labor market that’s undergoing a structural shift as a result of an aging population, increased Baby Boomer retirements, a decline in immigration and the advancement of artificial intelligence.

September’s job gains marked a slowdown from August, when a downwardly revised 133,000 jobs were added. (Economists had previously cautioned that August’s surprisingly strong gains likely reflected some seasonal factors that overstated hiring activity.) In addition, July turned negative, with 10,000 jobs lost (previously a 21,000-job gain).

Employers were expected to add about 90,000 jobs in September with an unemployment rate holding at 4.1%.

Unemployment ticked up in September in part because more people entered or re-entered the labor force. The labor force participation rate moved higher last month.

The annual rate of wage growth slowed for the fourth month in a row, landing at 3% in September, which is the lowest since May 2021.

The job market has mostly been holding up despite a growing list of threats to hiring, from an aging population and the rapid adoption of AI to higher oil prices, policy uncertainty and the war with Iran.

Stocks rose and bond yields fell as traders pared back bets for a rate hike from the Federal Reserve at its meeting later this month. The S&P 500 gained 0.9%, and the Nasdaq surged 1.3%. The Dow was up 380 points, or 0.75%. Treasury yields moved lower. The key 10-year yield fell to 5.21%, but is still trading at multi-year highs.

“Today’s report may revive the ‘bad news is good news’ narrative, but hoping for a weaker labor market just to secure easier financial conditions is a poor tradeoff,” Bret Kenwell, US investment analyst at eToro, said in a note.

“Lower rates may support markets in the near term, but a meaningful deterioration in hiring and income would eventually weigh on consumer spending and economic growth,” he said.

“Inflation remains a problem, but a breakdown in the labor market would create an entirely different one.”

This story is developing and will be updated.

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CNN’s John Towfighi contributed reporting.