The US labor market weakened further in August, with job creation slowing dramatically and unemployment rising to its highest point in more than three years.
According to the Department of Labor, employers added just 22,000 jobs in August — a steep drop from July’s revised figure of 79,000. The unemployment rate inched up from 4.2 percent to 4.3 percent, the highest since 2021 and in line with economists’ forecasts.
The report also revised earlier figures downward. Job growth initially reported at 14,000 for June was adjusted to show a loss of 13,000 — the first monthly decline since 2020. July’s numbers, however, were revised slightly upward.
The weak results underscored concerns about a slowing economy and heightened uncertainty stemming largely from President Donald Trump’s unpredictable tariff policies. Economists say the trade environment has forced companies to delay investment and scale back hiring plans.
Sector Breakdown
Most of August’s job growth came from the health care sector, which added 31,000 positions. Without that boost, overall employment would have declined. Federal government employment fell by 15,000 in August and is down 97,000 since peaking in January. Manufacturing lost 12,000 jobs last month, contributing to a year-long decline of 78,000, while employment in wholesale trade also dropped.
EY senior economist Lydia Boussour attributed the weakness to “rising operating costs and policy uncertainty,” particularly the impact of tariffs on goods-producing industries.
Wages and Market Outlook
Average hourly earnings rose 0.3 percent in August, matching July’s pace, but wage growth did little to offset broader concerns about job creation. Analysts warned that the economy may be shifting from a “no hiring” environment toward layoffs, raising the risk of recession.
Consensus forecasts had predicted 78,000 new jobs for August, meaning the final tally fell well short of expectations. So far in 2024, monthly job gains have averaged 168,000, making August’s figure a notable outlier.
Implications for the Federal Reserve
The weaker labor market strengthens the case for interest rate cuts at the Federal Reserve’s September 16–17 meeting. Fed Chair Jerome Powell has already indicated openness to reducing rates to counter economic headwinds. The central bank has kept rates steady at 4.25 to 4.50 percent since December, awaiting clearer signals on the impact of tariffs and inflation.
Economists caution, however, that while slowing employment supports monetary easing, risks of renewed inflation from tariffs could influence the pace and scale of future cuts.
“This is clearly not an economy operating at maximum employment,” said Mortgage Bankers Association chief economist Mike Fratantoni.
