WASHINGTON, D.C.: A sharp slowdown in U.S. hiring in September and hefty downward revisions to previous months pushed the prospect of another Federal Reserve interest rate increase in October further out of view, even as economists cautioned against reading the report as a sudden deterioration in the labor market.

Nonfarm payrolls increased by just 29,000 jobs last month, well below the 90,000 gain economists polled by Reuters had expected, the Labor Department's Bureau of Labor Statistics said October 2.

August payroll growth was revised down to 133,000 from the previously reported 162,000, while July was revised to show the economy shed 10,000 jobs. Together, July and August payrolls were 60,000 lower than previously estimated.

The unemployment rate increased to 4.2 percent from 4.1 percent in August as more people entered the workforce.

Economists noted that payrolls tend to underperform when the Labor Day holiday falls relatively late in September, as it did this year. There have also been no signs of a broad increase in layoffs, with first-time applications for unemployment benefits hovering at 57-year lows.

"This is a disappointing jobs report and a reminder that the low-hire, low-fire labor market never went away," said Olu Sonola, head of U.S. economics at Fitch Ratings. "Weak job growth, a slightly higher unemployment rate, contained wage gains and downward revisions to earlier payroll estimates give the Fed little reason to keep an October rate hike on the table. But CPI remains the report that matters most."

Financial markets reduced bets on a rate increase at the Fed's October 27-28 meeting to roughly 13 percent, from 22 percent before the report and about 69 percent a week earlier, according to CME Group's FedWatch tool.

The Fed raised its benchmark overnight interest rate by 25 basis points last month to a range of 3.75 percent-4.00 percent, its first increase in three years, and indicated further increases could follow. Economists continued to expect a December hike with inflation still above the central bank's 2 percent target.

Healthcare added 17,000 jobs in September, below its average monthly increase of 33,000 over the past year. Construction payrolls rose by 11,000, and manufacturing added 9,000, while financial activities lost 7,000 positions.

The labor force rose by 485,000, lifting the participation rate to 61.8 percent from 61.6 percent in August. Household employment rose by 406,000.

U.S. stocks opened higher following the report, while the dollar slipped against a basket of currencies and Treasury yields were mostly lower.