The headline
The economy added just 22,000 jobs in August, and the unemployment rate rose to 4.3%, the Bureau of Labor Statistics said Friday.
Revisions in the report also showed that the United States lost jobs in June.
Investors had expected roughly 75,000 new jobs in August and for the unemployment rate to rise a tenth of a percentage point to 4.3%.
The interpretation
“My thoughts are, ‘Ouch,’ that’s pretty doggone soft and has been getting softer,” Dan North, a senior economist with Allianz Trade Americas, told the Washington Examiner. North pointed out that the revised June jobs number marks the first month of negative employment growth since 2020.
North said the report all but locks in a September interest rate cut by the Federal Reserve and points to another cut later this year.
What it means … for Trump
Friday’s report is the first the BLS has produced since President Donald Trump fired the commissioner of the agency following the report for July, which had shown unusually large downward revisions to previous months’ job gains.
The continued weak jobs growth in August adds to the evidence that the labor market is slowing. The economy shed jobs in June for the first time since the aftermath of the pandemic.
One major question about the jobs market, a factor that makes it harder to interpret the headline number of job gains, is the role played by Trump’s immigration policies, which have massively slowed net migration into the country and may have turned it negative.
Yet lower immigration rates might not necessarily entail rising unemployment because a decline in the immigrant workforce would also shrink the denominator of the unemployment rate.
Another top worry of investors is that the tariffs implemented by Trump will slow growth and tip the economy into recession.
What it means for … the Fed
Friday morning’s report led investors to bet it is a virtual certainty that Fed officials will cut their interest rate target at their next meeting later this month and that they will lower rates more steeply over the course of this year.
Trump has been pressing Chairman Jerome Powell hard to lower rates to boost borrowing and spending. Powell hinted in a major speech in late August that the central bank will move toward rate cuts. The question now is how quickly the interest rate target will come down.
The underlying reality
Friday’s report showed that employment growth has slowed significantly in recent months, even turning negative in June.
It is helpful to look at the overall trend for the labor market. With a negative revision of 27,000 to June’s job gains and only a slight upward revision of 6,000 to July’s number, the three-month moving average of job gains was just 29,000 in August. That is below the rate needed to keep up with population growth.
Roughly 111,600 new payroll jobs are needed each month to keep unemployment from rising, the “breakeven rate” of job growth, according to one estimate from the Federal Reserve Bank of Atlanta.
But that figure is highly uncertain, thanks to the Trump administration’s crackdown on illegal immigration. The breakeven rate might be closer to zero if net migration has stalled, and it might even be negative if more people are leaving the country than entering.
Prime-age employment, relative to the overall population, is strong by historical standards and ticked up in August — a silver lining in the report.
Recession watch
The unemployment rate, taken from the jobs report’s household survey, is still low by historical standards. It rose a tenth of a percentage point to 4.3% in August.
Recessions entail a rising unemployment rate.
Friday’s data suggest that the U.S. labor market is still not triggering one major recession indicator — namely, when the three-month moving average of the unemployment rate rises half a percentage point relative to its minimum point over the past year. This indicator, known as the Sahm Rule, signaled the start of all postwar recessions.
The indicator had been triggered in mid-2024 but is no longer signaling a recession.
Federal government employment
Federal government employment fell by 15,000 in August and is now down about 97,000 since Trump came into office. The number of federal employees is a key statistic to watch to see the effects of the budget-cutting efforts of the Trump administration and the Department of Government Efficiency.
Manufacturing employment
Employment in manufacturing declined by 12,000 in August, adding to a downward trend.
The manufacturing sector is of particular interest because Trump has said his tariffs will bring manufacturing to the U.S. from other countries. He has imposed tariffs on China and trading partners around the world and on steel, aluminum, autos, auto parts, and a number of other goods and services.
Other industries
The leisure and hospitality sector in the past year has finally exceeded the employment levels it reached in February 2020, right before restaurants and bars were forced to shut down across the country. It’s continued to grow steadily.
Construction employment appears to be declining after the housing market took a massive hit over the past few years as mortgage rates have soared alongside the Fed’s rate hikes. The sector is also under pressure from Trump’s tariffs and his immigration overhauls.
Economists will watch closely for any further signs of slowing hiring in construction.
Unemployment rates by race and ethnicity
The household survey also includes unemployment rates by race and ethnicity. Rates for all groups neared record lows in the past few years but have since edged up.
In particular, the unemployment rate for black workers rose to 7.5% in August.
