U.S. employers added just 22,000 jobs in August and the unemployment rate inched 0.1% higher, continuing a summer slowdown in U.S. job growth that sets the stage for an increasingly likely September interest rate cut.
The August jobs report from the U.S. Bureau of Labor Statistics (BLS) — the first to be released by the agency since President Trump fired the bureau commissioner last month, claiming without evidence that a dour July jobs report had been “manipulated for political purposes” — revealed weaker-than-expected August nonfarm payroll growth. Economists surveyed by The Wall Street Journal had forecast 75,000 jobs added in August.
The unemployment rate rose slightly last month to 4.3% from 4.2% in July. The unemployment rate has remained stable between 4% and 4.3% since July 2024, with a three-month trending average of 4.2%.
June’s already drastically reduced payrolls estimate was further revised down by 27,000 to reflect a net loss of 13,000 jobs that month — the first decline in payrolls since 2020. July job gains were revised higher by 6,000, from 73,000 to 79,000.
Meanwhile, the number of long-term unemployed people — defined as those jobless for roughly six months or more — remained stable in August at 1.9 million. The long-term unemployed account for 25.7% of all unemployed people and increased by 385,000 from a year ago.
The report raised investor odds to 100% that the Federal Reserve will trim its overnight borrowing rate by at least 25 basis points when its rate-making body convenes Sept. 16-17. That’s according to the CME FedWatch tool, which tracks fed funds futures prices.
“The slowdown in the job market should be more than enough for the FOMC [Federal Open Market Committee] to cut its short-term rate target at its September meeting, as this is not a picture of an economy at ‘maximum employment,’” commented Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association. “The pace of any additional cuts will certainly be tempered by the ongoing risk of a pickup in tariff-induced inflation.”
Odds of a jumbo 50-basis-point cut to the benchmark federal funds rate were about 12% as of this article’s publication. Investor odds of a 25-basis-point cut hovered around 86% on Friday, falling from roughly 97% on Thursday morning.
“The underwhelming jobs report reinforces the picture of a labor market that’s losing momentum without collapsing,” added Sam Williamson, senior economist at First American, reacting to Friday’s jobs report. Analysts across the economy assign that lost momentum in job growth to economic uncertainty surrounding U.S. tariff policy and a slowing economy.
Private-sector employment data published Thursday by ADP, a payroll processing company, showed private employers adding just 54,000 jobs in August. Nela Richardson, chief economist at ADP, attributed the slowdown to a variety of things, “including labor shortages, skittish consumers and AI disruptions.”
Sectors that ramped up hiring in August, according to Labor Department figures, included health care (31,000 jobs added) and social assistance (16,000). Those gains were offset by job losses in manufacturing, which shed 12,000 positions in August and 78,000 jobs year over year.
Federal payrolls also continued declining in August, shedding 15,000 jobs last month and down 97,000 jobs from January. Federal workers on paid leave or receiving severance pay — such as the thousands of federal workers who chose deferred resignation under the Trump administration’s federal workforce reduction program — register as employed in the survey.
Selma Hepp, chief economist at real estate market analytics firm Cotality, told Scotsman Guide that a sustained slowdown in job growth was not unexpected for 2025.
“The question was how much we were going to slow down, and all economists were warning that the slowdown, when it comes, is going to be really quick and it’s going to be an exponential increase in unemployment,” she explained. “It’s not just going to be linear.”
However, assumptions that a rate cut automatically leads to job growth instead of, say, capital expenditures in technology, reflect the bluntness of Federal Reserve policy tools in responding to the current economic predicament.
“It’s now more difficult to weed out what is really causing the slowdown to be able to provide an appropriate policy response,” Hepp continued. “Is it tariffs? Is it AI? Is the rate cut really going to make a whole lot of difference for the job market at this point? There are so many other things.”
Overall, employment growth has averaged just 29,000 for June, July and August, reflecting sustained weakness in the labor market. The Job Opening and Labor Turnover Summary (JOLTS) for July published on Wednesday by the Labor Department showed the number of unemployed workers exceeded job openings for the first time since April 2021.
With the deceleration in jobs growth spread fairly broadly across industries, markets may begin to anticipate a faster rate of policy easing coming out of the September Fed meeting.
“The market now expects a cumulative 1.5 percentage points in cuts to the federal funds rate (six cuts of 25 basis points each) through the end of 2026,” commented Preston Caldwell, chief U.S. economist at the ratings agency Morningstar. “That’s a downward shift of about 0.5 percentage points compared to two months ago — driven almost entirely by the weak data in the last two month’s jobs reports.”
