U.S. job growth weakened sharply in August while the unemployment rate increased to 4.3%, confirming that labor market conditions were softening and sealing the case for an interest rate cut from the Federal Reserve this month.
Nonfarm payrolls increased by only 22,000 jobs last month after rising by an upwardly revised 79,000 in July, the Labor Department's Bureau of Labor Statistics said in its closely watched employment report on Friday. Economists polled by Reuters had forecast payrolls rising by 75,000 positions after a previously reported 73,000 gain in July.
The initial August job count has tended to exhibit a weak bias, with revisions subsequently showing strength. Estimates ranged from no jobs added to 144,000 positions created.
The report followed news this week that there were more unemployed people than vacancies in July for the first time since the COVID-19 pandemic. Job growth has shifted into stall speed, with economists blaming President Donald Trump's sweeping import tariffs and an immigration crackdown that has reduced the labor pool. The softness in the labor market is mostly coming from the hiring side.
Trump's duties, which have boosted the nation's average tariff rate to the highest level since 1934, stoked fears of inflation and resulted in the U.S. central bank pausing its interest-rate cutting cycle. Just as some of the uncertainty over trade policy was starting to lift with most tariffs now in place, a U.S. appeals court ruled last Friday that many of the duties were illegal, keeping businesses in a state of flux.
The unemployment rate increased from 4.2% in July.
Trump last month fired the BLS commissioner Erika McEntarfer, accusing her, without evidence, of faking the employment data. That followed sharp downward revisions to May and June's payroll counts.
But economists have defended McEntarfer and attributed the revisions to the 'birth-and-death" model, a method the BLS uses to try to estimate how many jobs were gained or lost because of companies opening or closing in a given month.
LOW LABOR MARKET CHURN
"We are in a low churn labor market, with not a lot of hiring or firing happening. So that means the job growth that we do see in the economy is mainly driven by the net birth of new firms," said Ernie Tedeschi, director of economics at the Budget Lab at Yale University.
"But that just happens to be the most imputed part. It's the most sensitive to revision, because it's the result of explicit modeling by BLS, rather than something that they can survey."
Slow job growth is likely to be reinforced when the BLS next Tuesday publishes its preliminary revision estimate of the level of employment for the 12 months through March.
Based on the currently available Quarterly Census of Employment and Wages data, economists estimated the level of employment could be revised down by as much as 800,000. The QCEW data is derived from reports by employers to the state unemployment insurance programs.
Trump has nominated E.J. Antoni, chief economist at the conservative think tank Heritage Foundation. Antoni, who has penned opinion pieces critical of the BLS and even suggested suspending the monthly employment report, is viewed as unqualified by economists across political ideologies.
Fed Chair Jerome Powell last month signaled a possible rate cut at the U.S. central bank's September 16-17 policy meeting, acknowledging the rising labor market risks, but also added that inflation remained a threat. The Fed has kept its benchmark overnight interest rate in the 4.25%-4.50% range since December.
Canada's economy lost a net 65,500 jobs in July, largely in part-time work, and the jobless rate rose to 7.1%, Statistics Canada data showed on Friday.
Employment in the goods-producing sector grew by a net 1,700 jobs, largely in construction. The services sector was down by a net 67,200 positions, led by professional, scientific, and technical services, as well as transportation and warehousing.
Aug 2025 Jul 2025
Jobs gain/loss -65,500 -40,800
full-time -6,000 -51,000
part-time -59,700 +10,300
Unemployment rate 7.1% 6.9%
Participation 65.1% 65.2%
Labor force 22.550 mln 22.581 mln
Aug 2025 Aug 2024 % change
Avg hourly wage C$37.81 C$36.50 +3.6
NOTE: Analysts surveyed by Reuters had forecast 10,000 new jobs in August, and for the unemployment rate to rise to 7.0%. Hourly wage figures are for permanent employees.
The bottom line for the August Employment Situation is that hiring is trending lower and is concentrated in a few narrow sectors. Unemployment is rising bit by bit, but the restraint is due more to reshaping the demographics of available labor in the job market. Wage growth continues. However, it may be an artifact of hiring taking place for skilled workers who can command bigger compensation, but even that seems to be ebbing.
When the FOMC meets on September 16-17, it will have more and more convincing evidence that the mandate for maximum employment could use a little support from a rate cut. However, that will have to be balanced against the next round of inflation data for August – the PPI on Wednesday, the 10th, and the CPI on Thursday, the 11th. If the price increases associated with tariffs are more visible in the data, anything larger than a 25-basis point cut is unlikely.
Nonfarm payrolls were up 22,000 in August and well below the market consensus. There was a net downward revision of 21,000 to the prior two months. Private payrolls rose 38,000 in August, while government payrolls were down 16,000. For the third quarter to date, monthly payroll increases averaged 51,000, down somewhat from the average of 55,000 a month in the second quarter and lower than the average of 111,000 in the first quarter. Overall, hiring has slowed substantially with mixed conditions across industries.
Goods producers' payrolls were down 25,000 in August, with declines in all major categories. Private sector service-providers’ payrolls were up 63,000 in August, but the majority of that was from a 46,800 increase in health care and social assistance, and 28,000 in leisure and hospitality.
Average hourly earnings are up 0.3 percent in August from July and up 3.7 percent year-over-year. In the aggregate, workers continued to receive moderate raises, but the trend is slowing.
The unemployment rate rose one-tenth to 4.3% in August and was in line with market expectations. This was the highest since 4.5% in October 2021. The labor force was up 436,000 to 170.8 million in August, with the number of employed up 288,000 and unemployed up 148,000. A 4.3% unemployment rate is not bad, but it needs to be read in the context of underlying changes in the labor market due to the massive influence of policies from the Trump administration.
There were indications of a less positive situation for workers in August. The number of people working part-time for economic reasons was up 65,000 to 4.749 million. Job losers were up 32,000 to 3.437 million. The number of job leavers was unchanged at 784,000 in August. New entrants to the labor force are down 199,00 to 786,000 while reentrants are up 107,000.
When the FOMC meets on September 16-17, it will have more and more convincing evidence that the mandate for maximum employment could use a little support from a rate cut. However, that will have to be balanced against the next round of inflation data for August – the PPI on Wednesday, the 10th, and the CPI on Thursday, the 11th. If the price increases associated with tariffs are more visible in the data, anything larger than a 25-basis point cut is unlikely.
Nonfarm payrolls were up 22,000 in August and well below the market consensus. There was a net downward revision of 21,000 to the prior two months. Private payrolls rose 38,000 in August, while government payrolls were down 16,000. For the third quarter to date, monthly payroll increases averaged 51,000, down somewhat from the average of 55,000 a month in the second quarter and lower than the average of 111,000 in the first quarter. Overall, hiring has slowed substantially with mixed conditions across industries.
Goods producers' payrolls were down 25,000 in August, with declines in all major categories. Private sector service-providers’ payrolls were up 63,000 in August, but the majority of that was from a 46,800 increase in health care and social assistance, and 28,000 in leisure and hospitality.
Average hourly earnings are up 0.3 percent in August from July and up 3.7 percent year-over-year. In the aggregate, workers continued to receive moderate raises, but the trend is slowing.
The unemployment rate rose one-tenth to 4.3% in August and was in line with market expectations. This was the highest since 4.5% in October 2021. The labor force was up 436,000 to 170.8 million in August, with the number of employed up 288,000 and unemployed up 148,000. A 4.3% unemployment rate is not bad, but it needs to be read in the context of underlying changes in the labor market due to the massive influence of policies from the Trump administration.
There were indications of a less positive situation for workers in August. The number of people working part-time for economic reasons was up 65,000 to 4.749 million. Job losers were up 32,000 to 3.437 million. The number of job leavers was unchanged at 784,000 in August. New entrants to the labor force are down 199,00 to 786,000 while reentrants are up 107,000.