U.S. employment growth unexpectedly slowed for the third straight month in September and the jobless rate rose, which could make the Federal Reserve more cautious about raising interest rates.
Nonfarm payrolls rose 156,000, down from a gain of 167,000 jobs in August, the Labor Department said on Friday.
Although the employment report suggested the U.S. economy was still expanding, it was expected to further reduce the chance of a rate increase at the Fed's November policy meeting. There is, however, a much higher likelihood of a hike at the U.S. central bank's last meeting of the year in December.
"It's strong enough that you're not worried about the U.S. slipping" into an economic slump, said Michael Jones, an investment officer at RiverFront Investment Group in Richmond, Virginia. "But it's not so strong that it precipitates immediate action from the Fed."
U.S. stock futures moved sharply higher after the payrolls report, while the dollar pared gains against a basket of currencies. Prices for U.S. Treasuries rose.
Fed Chair Janet Yellen has said the economy needs to create less than 100,000 jobs a month to keep up with population growth. Average monthly job gains have been about 180,000 this year, which Yellen has described as "unsustainable."
Economists polled by Reuters had expected employers to add 175,000 jobs last month. The government said 7,000 fewer jobs were created in August and July than had been previously reported.
The unemployment rate ticked up a tenth of a percentage point to 5.0% in September. The increase was driven by Americans rejoining the labor force, which suggests slack remains in the job market.
Hourly wages for private sector workers rose 2.6% in September from the same month a year earlier, in line with economists' expectations. The annual growth rate in hourly wages has shown signs of accelerating over the last year although it remains slower than before the 2007-2009 recession.
Friday's employment report will be the last before the Fed's Nov. 1-2 policy meeting. Investors see almost no chance of a rate increase at that meeting given how close it is to the Nov. 8 U.S. presidential election.
Yellen said last month that the Fed will likely raise rates once this year, but prices on fed funds futures suggest just above even odds the increase will come in December.
Three Fed policymakers voted for a hike last month when the central bank kept rates steady. However, Friday's data could boost the case of Fed policymakers who have vocally defended a go-slow approach to rate increases.
Republican presidential candidate Donald Trump has accused the Fed of playing politics by holding rates low, a charge Yellen and other Fed policymakers have denied.
Trump has also made reversing job losses at U.S. factories a central campaign promise. Manufacturing employment fell by 13,000 jobs in September and the sector has shed jobs in three of the last five months.
At the same time, the job market on balance continues to firm, even if at a slower pace, which could be an asset for Democratic presidential candidate Hillary Clinton. She has argued that Democratic President Barack Obama's policies have helped the economy create millions of jobs.
The Fed lifted its benchmark overnight interest rate at the end of last year for the first time in nearly a decade, but has held it steady so far this year amid concerns over persistently low inflation.