US labor market ‘has headed off a cliff-edge’ with just 22,000 jobs added in August – business live | Business
US economy only adds 22,000 jobs in August
Newsflash: The US economy added much fewer jobs than expected last month, in a sign that the labor market may be cooling sharply.
August’s non-farm payroll rose by just 22,000 jobs, the Bureau of Labor Statistics has reported, much weaker than the 75,000 expected.
That’s a very weak jobs report, and the latest signal that the US economy is losing momentum.
The US unemployment rate has risen to 4.3%.
The BLS says:
A job gain in health care was partially offset by losses in federal government and in mining, quarrying, and oil and gas extraction.
Key events
President Trump is wrong to put the blame on the Fed for the latest employment figures, Professor Costas Milas of University of Liverpool’s management school, tells us.
A new academic paper finds that Chicago’s National Financial Conditions Index (NFCI) and economic uncertainty measures have good real-time forecasting power for the US employment. Now then: NCI is currently no worse than when Trump won in November; however the monthly EPU is very much elevated thanks to Trump’s economic policies.
Put together, these measures point to some slowdown in employment, triggered by Trump’s policies. So, a 25 basis points interest rate cut seems a reasonable hedge later this month!
Arthur Laffer, Jr, President at Laffer Tengler Investments, says a shift is taking place in the US economy due to government cuts, and the AI boom.
Laffer says:
Some of the impact is coming from the DOGE initiatives as Federal workers who took buyouts leave their jobs but also interesting in the numbers is the decline in manufacturing jobs.
We believe that this is being caused by two factors: tariffs and AI adoption. The tariff changes have impacted some businesses much more than others. The traditional legacy manufacturing base in the US is having to adjust to the tariff impacts by reducing costs mostly through automation and robotics. New and emerging manufacturing is implementing AI/robotics at a faster and higher rate to drive efficiency and cost reductions.
Trump: Fed should have lowered rates long ago
Donald Trump has found someone to blame for the slump in hiring in his first year in office.
Posting on his Truth Social site, the president says:
Jerome “Too Late” Powell should have lowered rates long ago. As usual, he’s “Too Late!”
Another cause of the jobs slowdown, of course, could be the uncertainty and upheaval caused by the US trade war.
Isaac Stell, investment manager at Wealth Club, says:
“A rate cut in September is now a forgone conclusion following a weaker than anticipated jobs report. Not only are today’s figures showing that cracks are appearing in the labour market but revisions to prior months job reports show the picture is far less rosy than previously thought. The unemployment rate is also an area of concern hitting its highest level since October 2021.
The US has been through a myriad of trials recently, so it is no surprise that employers remain cautious on hiring, given the uncertainty over tariffs, trade and immigration policies.
One theory for the slowdown in the US jobs market is that companies are deploying AI systems rather than taking on more staff.
Nancy Tengler, CEO and CIO of Laffer Tengler Investments, explains:
We believe companies are investing in technology instead of human capital. We heard this from the companies during earnings, we see it in the business investment capex, which was up dramatically in the quarter and driven almost 50% by technology spending.
This is consistent with our thesis for the last four years, that draws an analogy to the 1990s and the productivity-driven boom that drove the economy and stock market for the second half of the decade.
This chart from ING shows how the US jobs market has slowed in 2025:
They say:
Another soft jobs report is intensifying calls for meaningful Federal Reserve interest rate cuts. Consumers are already worried about squeezed spending power from tariffs and are now increasingly concerned about job security. Fed doves will intensify their calls for action
The weakness in the US jobs market could encourage some policymakers at the Fed to consider a jumbo interest rate cut, rather than just quarter-point reduction to rates.
Janet Mui, head of market analysis at wealth manager RBC Brewin Dolphin, explains:
“The addition of just 22,000 jobs in August underscores a clear cooling trend in the U.S. labour market.
Manufacturing payrolls, which are particularly sensitive to tariffs, saw further declines and have now dropped by 42,000 since April this year.
This weak print is politically awkward for the administration, which has focused heavily on job creation via tariff-led industrial policy. With clear signs of slack emerging, today’s U.S. jobs report gives a potential green light for the Federal Reserve to cut rates in September. There is even chatter that a jumbo 50bps rate cut is on the table, depending on next week’s inflation data.
Investors are increasingly positioning for a shift toward looser monetary policy, with Fed funds rate expectations dipping below to 2.8% by the end of 2026.”
US stock market hits record high after weak jobs report
Wall Street traders have driven stocks up to a record high at the start of trading in New York.
The S&P 500 share index, and the tech-focused Nasdaq share index have both touched intraday record highs as soon as the opening trading bell was rung.
That’s a surprising reaction to the weak August jobs report, until you remember that investors are now more convinved that the Federal Reserve will cut interest rates.
Neil Birrell, chief investment officer at Premier Miton Investors, explains:
“The US jobs market is probably the most watched economic data at the moment, having been noted by the Fed as a key indicator.
The August data shows a notably lower gain in payrolls than expected and the unemployment rate moved up to 4.3% with the average weekly hours worked falling.
There isn’t a huge amount to read into the numbers that is surprising, but it does suggest a weakening jobs market, which will probably nail down a Fed rate cut this month.”
Here’s another example of how the US jobs market has weakened:
The labor market is going from frozen to cracking.
Look at how many industries have LOST jobs in the past 3 months.
Mining -13,000
Construction -10,000
Manufacturing -31,000
Information -15,000
Business/Professional -51,000
Federal gov’t -34,000
Finance 0 job gainsThe US job… pic.twitter.com/BsUYoCTMX3
— Heather Long (@byHeatherLong) September 5, 2025
Capital Economics: US labor market has headed off a cliff-edge
August’s employment report confirmed that “the labour market has headed off a cliff-edge,” says Bradley Saunders, North America economist at consultancy Capital Economics.
Saunders told clients:
Non-farm payrolls rose by just 22,000 last month, while June’s 19,000 increase was revised to show a 27,000 fall – the first out-and-out decline in monthly employment since late 2020.
Along with a slight upward nudge to July’s figure, this leaves the three-month average employment gain at 29,000. The private sector added just 38,000 jobs last month, and even this modest figure owed a lot to a 47,000 rise in health care & social assistance employment.
Elsewhere, employment fell by 12,000 in both manufacturing and wholesale trade, as tariffs continued to bite. This takes the total toll on manufacturing employment since the start of the year to 78,000, confounding hopes of a tariff-led reshoring renaissance.
US manufacturing employment down by 78,000 in last year
One of the many pieces of bad news in today’s US jobs report is that manufacturing employment is down by 78,000 over the year.
That shows that Donald Trump’s promises of a factory resurgence have not yet been delivered.
I’m not a big believer in diving into the industry breakdowns because I believe that all jobs matter.
But the Administration has made dramatic policy shift to boost manufacturing, and it just ain’t working. Manufacturing employment fell -12k, and is down -78k over the year.
— Justin Wolfers (@JustinWolfers) September 5, 2025
Bond yields fall after US jobs report misses forecasts
The weak US jobs report is sending investors racing to buy government bonds, driving up prices and lowering yields.
The yield, or interest rate, on US 30-year bonds has dropped by 6 basis points (0.06 percentage points), with shorter-dated Treasuries also rallying following the news that just 22,000 new jobs were created across the US last month.
UK government debt is benefitting too, just days after a painful sell-off.
Today, UK 30-year gilt yields have dropped by 5bps to 5.528%, the lowest since 18 August 18.
Benchmark 10-year UK bonds have also hit their strongest level since 18 August; they’re down 6bps at 4.668%.
That’s good news for chancellor Rachel Reeves – lower borrowing costs will mean the ‘black hole’ in her budget calculations will be smaller.
The downside, though, is that a weakening US economy is bad news for every other country too….
“There’s barely been any job growth in the past 4 months,” points out Heather Long, chief economist at credit union Navy Federal.
Responding to today’s weak US jobs report, Long posts:
Almost all the jobs added are in healthcare. Without healthcare, job growth would be NEGATIVE in the past few months.
The Federal Reserve has to cut in September. And maybe October now.
The US economy lost -13,000 jobs in June –>The first negative month since December 2020 (!)
There’s barely been any job growth in the past 4 months.
Almost all the jobs added are in healthcare. Without… pic.twitter.com/p2hrN8wsh0
— Heather Long (@byHeatherLong) September 5, 2025
September Fed rate cut looks nailed on
The sharp deterioration in hiring across America in the last few months makes it virtually certain that the US Federal Reserve will cut interest rates at its meeting later this month.
The odds of a September rate cut are 99%, according to CME’s Fedwatch tool (as they also were early this morning).
But as Richard Carter, head of fixed interest research at Quilter Cheviot explains, inflation could complicate the decision:
“Markets have been pricing in a 0.25% rate cut at the Federal Reserve’s upcoming monetary policy meeting, and today’s softer than expected jobs number may well grant that wish. Total nonfarm payroll employment shows August saw an increase of just 22,000, down markedly from a revised 79,000 in July and far below estimates. Meanwhile, the unemployment rate rose slightly to 4.3%.
“Last month’s payroll data showed large downward revisions to previous months, with May and June’s employment numbers dropping by a combined 258,000 from initial estimates. Today, we have seen a further downward revision to June’s total, taking it from an increase of 14,000 to a decrease of 13,000, and a modest 6,000 upward revision to July’s figure.
“Earlier this week, jobless benefit claims ticked higher, and today’s worse than expected payrolls figure cements the fact that the jobs market is weakening significantly. Following the Fed’s decision to hold rates in July, markets had already largely priced in a cut, regardless of today’s numbers. Still, one major obstacle remains. Inflation continues to complicate the Fed’s path, and next week’s CPI print will be critical, especially as several FOMC members remain cautious about easing policy under political pressure. With the full impact of Trump’s tariffs still unfolding, a hotter than expected inflation reading could lead to a split decision later this month.”
