Falling short of consensus estimates, private employers added just 54,000 jobs in August, suggesting a hesitance to hire as the U.S. economy slows, inflation reaccelerates and uncertainty surrounding Trump administration tariff policy reigns. Economists polled by Dow Jones had forecast 75,000 private payroll additions last month, according to CNBC.
The month-over-month hiring slowdown reflected in the ADP National Employment Report published Thursday represents a 51% decline from the 106,000 private sector jobs added in July, favoring those calling for an interest rate cut when the Federal Reserve’s monetary policy committee convenes on Sept. 16-17.
Investor odds of a 25-basis-point cut to the benchmark federal funds rate had risen to 97.6% as of this article’s publication, according to the CME FedWatch Tool, which tracks fed funds futures prices.
Nela Richardson, chief economist for ADP, a leading payroll processing company, attributed the lost momentum from strong job gains at the start of the year to an atmosphere of uncertainty.
“A variety of things could explain the hiring slowdown, including labor shortages, skittish consumers and AI disruptions,” Richardson noted in a statement. ADP reported that pay gains rose 4.4% year over year but remained flat from July.
Private sectors exhibiting strength in August were leisure and hospitality and construction, which added 50,000 and 16,000 jobs, respectively. The trade, transportation and utilities sector shed 17,000 jobs; the education and health services sector lost 12,000 jobs; and the manufacturing sector saw a decline of 7,000 positions.
Tariff uncertainty
An update to the Purchasing Managers’ Index (PMI) published by the Institute for Supply Management on Tuesday showed contraction in the manufacturing sector for the sixth consecutive month as businesses await clarity on trade policy. The PMI is widely used to gauge economic conditions within the manufacturing and services sectors.
Tariffs are the linchpin of a protectionist trade policy levied by the Trump administration to reconstitute a U.S. industrial base that has been in decline for decades. The current 18.2% average statutory tariff rate is the highest level since the early-1930s, according to an analysis released Tuesday by the Budget Lab at Yale.
A ruling issued last Friday by the U.S. Court of Appeals declared President Trump’s imposition of so-called “reciprocal tariffs” under the International Emergency Economic Powers Act illegal. The administration has called on the Supreme Court to reverse the appeals court ruling, and Trump himself took to Truth Social following the ruling to warn that, if allowed to stand, “this Decision would literally destroy the United States of America.”
With the fate of U.S. tariff policy and its impact on consumer prices and the labor market uncertain, a series of lackluster monthly employment reports has shifted the perception of the U.S. labor market from one of resilience through the first half of 2025 to one of increasing weakness through the latter half.
A JOLTS jolt
Additional evidence of softening labor conditions arrived in the Wednesday publication of the Job Opening and Labor Turnover Summary (JOLTS) for July by the Bureau of Labor Statistics (BLS). For the first time since April 2021, the number of unemployed workers exceeded job openings.
Job openings in July totaled an estimated 7.18 million, while the number of unemployed workers totaled roughly 7.2 million, to create a ratio of job vacancies to unemployed workers of 0.99. The ratio in April 2021 was 0.96 as U.S. workers struggled to reenter a job market disrupted by the COVID-19 pandemic.
The Labor Department reported Thursday that applications for unemployment benefits rose modestly on a weekly basis for the week ending Aug. 30, increasing by 8,000 to 237,000, or slightly more than consensus estimates of 231,000 new applications. The Labor Department releases government employment figures for August on Friday.
Flagging labor conditions have not gone unnoticed by Federal Reserve Chairman Jerome Powell, who noted in his Aug. 22 speech at the central bank’s annual Jackson Hole Economic Policy Symposium that the “shifting balance of risks may warrant adjusting our policy stance.”
Regarding inflation, Powell noted the “effects of tariffs on consumer prices are now clearly visible.” Of the central bank’s overall predicament, he observed that “downside risks to employment are rising,” and “if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment.”
Shifting labor market perceptions among policymakers and industry stakeholders have adjusted commensurate investor odds of a September rate cut. On July 2, CME FedWatch showed the odds of a 25-basis-point cut at 71%, odds of a 50-basis-point cut at 21% and odds of no rate cut at just 6%.
Then, dramatic revisions to government employment figures for May and June, coinciding with below-consensus hiring figures for July published by the BLS in early August, sent shockwaves through the economy and Washington.
Stocks fell sharply on the news and President Trump fired BLS Commissioner Erika McEntarfer, alleging the jobs data had been “manipulated for political purposes.”
By Aug. 4 — the Monday following BLS’s Friday release of July jobs data and Trump’s firing of McEntarfer — CME FedWatch indicated that investor odds of a 25-basis-point cut had climbed to more than 90%.
