September jobs report misses forecasts. Here's what it means for advisors

U.S. employers added just 29,000 jobs in September and the unemployment rate rose to 4.2%, according to data released by the Bureau of Labor Statistics on Friday, which analysts say should lower the odds of another hawkish decision from Federal Reserve at its October meeting.

The BLS September jobs report fell far short of the 84,000 gain that economists surveyed by Dow Jones had expected, while the jobless rate edged up from the previous 4.1% read in August.

The release was one to watch for both market analysts and political pundits as it markeed the last monthly employment report before the November midterm elections.

Apart from the September data, the BLS revised its previously reported August gain of 162,000 jobs to 133,000, while amending July's first reported increase into a loss of 10,000 jobs. Together, the two months showed 60,000 fewer jobs than first reported.

Pay growth slowed too. Average hourly earnings rose 0.1% from August and 3% from a year earlier, below the 3.1% annual gain forecasters had expected.

Jobs report gives the Fed reason to wait on rate hikes

The data arrive two weeks after the Fed raised rates for the first time in three years. Policymakers voted 12-0 last month to lift the federal funds rate by a quarter point to a range of 3.75% to 4%. Before Friday's release, fed funds futures put the chance of a second hike this month at about 23%.

Bradford Smith, a portfolio manager at Janus Henderson Investors, said Friday's report tips the scales in favor of a non-hike for the October Fed meeting, though he also warned against reading too much into one soft month.

"It does, for now, take off the tail risk that the labor market has tightened to a level that accelerating economic activity results in wage-based inflation, which would further complicate the Fed's conundrum," Smith said.

Jeff Schulze, head investment strategist at the Franklin Templeton Institute, agreed the Fed is likely to wait before it hikes again.

"Today's soft payroll report demonstrates that the labor market is simmering, not boiling, which should bolster the case for the Fed to remain on hold at the October meeting," he said.

For Fed officials, the jobless rate muddies the decision even further given the emphasis Chair Kevin Warsh placed on unemployment during his remarks at Jackson Hole this summer.

"The pickup in the unemployment rate will likely create some trepidation for Fed officials after chair Warsh emphasized its importance (over the headline payroll numbers) this summer at Jackson Hole," Schulze said, adding that "the lack of evidence of a wage-price spiral should allow the Fed to remain flexible and take a more patient approach with the next rate hike."

Jeffrey Roach, chief economist for LPL Financial, said the latest data point to a labor market the has not broken.

"Despite the uptick in unemployment to 4.2%, the labor market is still operating in a comfortable range," he said.

On the other hand, Roach noted that the past few months' jobs prints suggest wages are not keeping pace with inflation, which could signal real pain ahead for those in the lower branch of the K-shaped economy.

"We are seeing the tension between the goods-producing sectors that support the AI boom and the services-producing sectors that are feeling the impact of technological change," he said. "Given the overall softness of the labor market, the likelihood of two Fed hikes is getting lower"