The U.S. labor market added far more jobs than forecast in September, while the unemployment rate fell unexpectedly, reflecting a better picture of the labor market than Wall Street had expected.

Bureau of Labor Statistics data released Friday showed the labor market added 254,000 jobs in September, more than the 150,000 economists expected.

Meanwhile, the unemployment rate fell to 4.1% from 4.2% in August. More new jobs were created in September than in August (revised 159,000). Revisions to both the July and August reports showed the U.S. economy added 72,000 new jobs in those two months than previously reported.

Wage growth, a key measure of inflation pressures, rose to 4% year-on-year, compared with an annual gain of 3.9% in August. On a monthly basis, wages increased by 0.4%, which is the same as in August.

The central question in Friday’s report was whether the data would reflect a significant slowdown in the labor market, which could lead to another big rate cut from the Fed. Robert Sockin, senior global economist at Citi, told Yahoo Finance that the better-than-expected jobs report makes it less likely that the Fed will act with the “urgency” it did at its September meeting when the central bank raised interest rates reduced by half a percentage point.

“This is putting a lot of pressure on the Fed,” he said, adding that it was uncertain the Fed would cut rates again by 50 basis points this year.

Following the report, markets have priced in a roughly 12% chance that the Fed will cut interest rates by half a percentage point in November, compared with a 53% chance a week ago, according to the CME FedWatch tool.

“Given the strength of the labor market reflected in the September employment report, the real debate at the Fed should be whether to ease monetary policy at all,” Paul Ashworth, chief North America economist at Capital Economics, wrote in a Friday Notice to customers. “Any hopes of a cut (50 basis points) are long gone.”

Futures tied to major U.S. stock indexes rallied on the news. S&P 500 futures (ES=F) gained nearly 0.8%, while Dow Jones Industrial Average futures (YM=F) gained about 0.5%. Contracts on the tech-heavy Nasdaq 100 (NQ=F) rose 1.1%.

Neil Dutta, head of economics at Renaissance Macro, wrote in a note after the release that the September jobs report was “undeniably good news” for the stock market.

“At the end of the day, the Fed still cuts interest rates even when the economy is growing,” Dutta wrote.

In Friday’s report, labor force participation remained unchanged from the previous month at 62.7%. Food service and drinking establishments led to a 69,000 increase in jobs this month. Meanwhile, 45,000 new jobs have been created in healthcare and public sector jobs have increased by 31,000.

The story continues

Earlier this week, data from ADP showed that the private sector added 143,000 jobs in September, above economists’ estimates of 125,000 and well above the 99,000 in August. This marked the end of a five-month decline in private sector job growth.

“This is a pretty healthy, broad recovery,” said ADP chief economist Nela Richardson. “And probably unexpected for a lot of people who thought the job market was on a downward trend. This month, of course, gives such assessments a break. Hiring numbers are still solid.”

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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