The U.S. labor market faltered in August, with job creation slowing dramatically and unemployment rising to its highest level in more than three years.
According to the Department of Labor, only 22,000 jobs were added last month, a steep drop from the 79,000 positions created in July. The unemployment rate inched up from 4.2% to 4.3%, marking its highest point since 2021.
Revisions to earlier data painted an even weaker picture: job growth in June, initially estimated at 14,000, was adjusted to show a loss of 13,000 jobs — the first monthly decline since 2020. Hiring in July was revised slightly higher.
Economists say the figures underscore a clear cooling in the labor market, with businesses holding back on new hires amid uncertainty stemming largely from President Donald Trump’s shifting tariff policies.
Sector Breakdown
Health care was the only bright spot, adding 31,000 jobs, but overall gains would have been negative without this sector.
Federal government employment fell by 15,000 in August and has declined by 97,000 since January.
Manufacturing jobs dropped by 12,000 last month and are down 78,000 over the past year.
Employment in the wholesale trade sector also slipped.
Lydia Boussour, senior economist at EY, explained that “rising operating costs and ongoing policy uncertainty” have forced companies to restrain hiring, with tariffs particularly weighing on goods-producing industries.
Average hourly wages grew 0.3% in August, matching July’s pace.
Concerns Over Recession
Economists warn that the U.S. is shifting from a “no-hiring” environment to a potential “layoff economy.” If the trend deepens, analysts believe it could tip the economy toward recession.
Nationwide chief economist Kathy Bostjancic emphasized that the weakness in recent labor data fully supports the case for the Federal Reserve to cut interest rates. “The fourth consecutive month of lackluster job growth signals a sharp slowdown and gives the Fed grounds to act at its September 16–17 meeting,” she said.
Fed and Political Pressure
The Federal Reserve has kept its benchmark interest rate steady at 4.25%–4.50% since December, waiting to assess the economic impact of tariffs. With the latest numbers, markets now expect rate cuts to begin soon, though analysts note that any additional moves will be tempered by concerns over tariff-driven inflation.
President Trump renewed his demand for Fed Chair Jerome Powell to reduce rates, arguing that cuts should have been implemented “long ago.”
The latest jobs report comes after Trump dismissed the commissioner of labor statistics last month, following his claim that July’s employment figures were “rigged.”
Looking Ahead
Payroll growth has averaged 168,000 in 2024, but the sharp slowdown in recent months highlights mounting challenges. Businesses cite tariff disruptions, snarled supply chains, and higher costs as reasons for delaying expansion plans.
Economists are now focused on how many rate cuts the Fed might deliver to cushion the weakening economy, with markets bracing for a pivotal September policy meeting.
