The U.S. labor market saw a sharp slowdown in August, as job growth nearly stalled and the unemployment rate climbed to a four-year high of 4.3%, the Labor Department reported on Friday. This data intensified concerns about a weakening economy and bolstered the case for the Federal Reserve to cut interest rates later this month.
Nonfarm payrolls increased by a mere 22,000 jobs in August, falling far short of expectations, following an upwardly revised gain of 79,000 in July. Economists had projected a much healthier 75,000 new jobs. The report also included a downward revision for June, showing a decline of 13,000 payrolls instead of the previously reported gain of 14,000 — marking the first monthly decrease since December 2020.
Christopher Rupkey, chief economist at FWDBONDS, stated: “The economy is skating as close to the edge of recession as you can get. Companies are clearly hunkering down and refusing to hire, and the blame can be traced back to Washington’s economic agenda.”
Political Pressures and Economic Policies
Economists point to key factors dragging down the labor market, including President Donald Trump’s tariffs, his crackdown on immigration, and deep government job cuts. Trump recently fired Bureau of Labor Statistics (BLS) commissioner Erika McEntarfer, accusing her without evidence of data manipulation. He has nominated E.J. Antoni, a noted critic of the agency, to replace her, a move that has been widely questioned by economists. On social media, Trump renewed his attacks on Fed Chair Jerome Powell, writing: “Jerome ‘Too Late’ Powell should have lowered rates long ago. As usual, he’s ‘Too Late!’”
Sector-by-Sector Trends
The healthcare sector added 31,000 jobs, though this was a weaker performance than its 12-month average of 42,000. Social assistance saw an increase of 16,000 positions. Federal government payrolls, however, shrank by 15,000 and have declined by 97,000 since January due to spending cuts. Manufacturing continued to shed jobs for the fourth consecutive month, a trend reflecting the impact of tariffs. Job losses were also seen in wholesale trade, information, financial activities, construction, and business services.
Wages remained a relatively bright spot, with average hourly earnings rising 0.3% in August, bringing the year-on-year increase to 3.7%. However, a decrease in hours worked has heightened concerns about overall economic growth.
Concerns Over Data Revisions
Economists have warned that future revisions to the data could reveal even deeper weakness. The Bureau of Labor Statistics is set to release preliminary figures that could lower employment estimates for the year ending in March by as many as 800,000 jobs.
Following the report, Wall Street stocks fell, while the dollar weakened and Treasury yields declined. Traders are now largely expecting the Fed to implement a quarter-point rate cut at its September 16–17 policy meeting, with two additional cuts likely before the end of the year.
