Weak 22,000 increase in August jobs increases the odds of a Fed rate cut.
The economy added a skimpy 22,000 new jobs in August and the unemployment rate rose to a nearly four-year high, underscoring the increasing fragility of the U.S. labor market.
The fourth subpar employment report in a row all but cements a reduction in U.S. interest rates by the Federal Reserve when top officials meet again in two weeks. Fed officials have grown more worried about the slowdown in hiring.
The increase in employment last month fell short of the 75,000 forecast of economists polled by the Wall Street Journal.
The unemployment rate inched up to 4.3% from 4.2% and reached the highest level since late 2021. For the first time since before the pandemic there are more unemployed workers than there are job openings.
The rise in the jobless rate last month, however, stemmed largely from more people entering the labor force in search of employment. The labor force typically expands in August as schools reopen and educational employees return to work.
Still, businesses have become more hesitant to hire because of softer sales and uncertainty about how much the Trump administration tariffs will cost them.
Many companies are letting open positions go unfilled or are relying on technology such as artificial intelligence instead of adding new workers, surveys of business executives show.
Key details: Very few industries are hiring right now.
Health-care providers added 47,00 employees and hotels and restaurants created 28,000 jobs. These two industries have created most of the new jobs in the past year.
The picture was darker in almost every other industry. Employment fell in manufacturing, construction, wholesale, government and professional jobs.
The previously reported 73,000 increase in new jobs in July, meanwhile, was raised to 79,000.
The June estimate was revised to show a 13,000 decline in jobs instead of a 14,000 increase. It was the first drop in employment since the end of 2020.
Unusually large revisions in the employment reports this year have raised questions about the accuracy of the jobs data.President Trump last month fired the commissioner of the Bureau of Labor Statistics in an unprecedented move and is seeking to install a conservative critic of the agency as its new chief.
The controversial firing has put the BLS under intense pressure at a time when the economy is undergoing great strain due to ongoing trade wars and the highest U.S. tariffs in decades.
Big picture: The jobs market was already cooling before the Trump administration launched the biggest trade wars in decades. Hiring has slowed to a crawl as businesses try to figure out how new tariffs will affect them and the broader economy.
A slate of new tariff agreements with other countries could thaw out the partial freeze in hiring. Fed interest-rate cuts might also help. Yet economists say U.S. growth is unlikely to pick up until the trade wars have faded.
Looking ahead: “The fourth month of sub-par employment performance signals a dramatic stall in hiring and fully supports the Fed starting rate cuts at the next meeting,” Nationwide chief economist Kathy Bostjancic said. “The real question now becomes now many rate cuts follow.”
