The pace of US jobs growth stalled for a second straight month, raising questions about whether the Federal Reserve can begin scaling back its enormous pandemic-era monetary stimulus as early as next month.

Employers in the world’s largest economy added just 194,000 jobs in September, falling short of the disappointing 366,000 gains posted in August and well below the monthly average of 561,000 since the start of the year. Economists had expected an increase of 500,000.

The unemployment rate declined for the third straight month, however, falling from 5.2 per cent to 4.8 per cent.

The surprisingly weak report signals that many of the forces holding back employees from returning to the workforce persist, suggesting a rockier path forward for the US economy.

While schools reopened last month, helping to ease some of the childcare issues that have deterred workers, shortages still remain. That has raised concerns that the recovery of the world’s largest economy may not be as strong as initially expected.

Chart showing shortfall in US non-farm payrolls since early 2020

There were 74,000 jobs created in the leisure and hospitality sector, a notable reversal from the previous month. Retail jobs and those for professional and business services also increased, as did transportation and warehousing posts. The number of public education jobs fell, with 161,000 fewer positions across local and government education.

Employment in food services and other dining establishments was little changed for the second straight month. From January to July, that sector reported average monthly gains of 197,000.

Wage growth did pick up, with average hourly earnings for all employees rising by 19 cents to $30.85.

“The data for recent months suggest that the rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages,” the Bureau of Labor Statistics said in its report.

Fed chair Jay Powell had said that a “decent” report would mean the employment benchmark set forward by the central bank to begin winding down its $120bn asset purchase programme would be met. September’s data may add a wrinkle to that plan. There are still 5m more Americans out of work than at the start of the pandemic.

The Fed has committed to buying Treasuries and agency mortgage-backed securities at that pace until it sees “substantial further progress” on dual goals of inflation that averages 2 per cent and maximum employment. The first goal has already been achieved, with consumer price growth hovering around a 13-year high.

Powell said last month, following the sharp slowdown in job creation, that the second goal was “all but met”.

The latest jobs data challenge the widely held view that a taper announcement will come at the next policy meeting in November. Powell said officials broadly support the stimulus programme ending in the second half of 2022, but said the timing and pace of the taper would not give a “direct signal” about the timing of future interest rate increases.

Projections published by the Fed last month suggest a growing number of policymakers believe an adjustment to rates may be appropriate by the second half of the year. Officials are now evenly split on the prospects of that, with at least three interest rate increases pencilled in by the end of 2023.

The Fed has stipulated it will keep its main policy rate at current near-zero levels until it sees inflation that is on track to “moderately exceed” 2 per cent “for some time” and maximum employment.

Senior officials have urged a patient approach to tightening policy, given marginal improvement in the labour force participation rate, which tracks the number of Americans employed or looking for a job.

In September, it was little changed at 61.6 per cent.

Shorter-dated Treasury yields, which move with interest rate expectations, fell immediately following the employment report. The largest move was in the five-year yield, which was down 0.01 percentage points at 1.01 per cent, while S&P futures whipsawed.

Additional reporting by Kate Duguid