August jobs report reveals slowing growth in US labor market

LinkedIn DMs are emptier than a college student's refrigerator during finals. At least, according to the Labor Department’s latest jobs report, which found the US economy added just 22,000 new jobs last month, far short of the ~75,000 forecasters had expected

Alongside data from August, the report revised June’s jobs figure downwards to a net negative for the month (-13,000)—the first such decline since December 2020.

• It also marks the first monthly jobs report since President Trump fired the head of the agency in charge of jobs data.
• Trump’s move came after the July release included significant downward revisions to previous months.

America’s job machine is idling

Nearly all of the new jobs added last month were in social assistance and healthcare (+46,800), according to the report. On the flip side, many industrial parts of the economy saw a hiring drought:

• The manufacturing sector saw its fourth consecutive month of job declines. It’s down 78,000 jobs since this time last year.
• The construction industry reported fewer jobs for a third straight month.
• Wholesale trade—a sector covering transportation, warehouse staff, and material handlers—has lost a combined 32,000 workers dating back to May.

Overall, unemployment remained low. The top-level figure rose from 4.2% to 4.3% in August. That’s slightly above a recent low of 3.4% in early 2023—the smallest figure in five-plus decades—but still relatively modest compared to historical averages.

Friday’s report tees up future Fed rate cuts

Analysts say the muted August jobs report all-but-guarantees that the Federal Reserve will start reducing baseline US interest rates at its next meeting later this month, and instead gives rise to a new question: How far and how fast will officials move to cut rates?

• Traders now see a ~75% chance that the Fed will make the equivalent of a quarter-point rate cut (25 basis points)—or more—at each of its three remaining policy meetings this year, per CME Group’s FedWatch tracker.
• For September, markets are pricing in an ~11% chance of a half-point rate cut (50 basis points) after Friday’s report.

Looking ahead…August's Consumer Price Index (CPI) is set to be released tomorrow, providing fresh inflation data ahead of the Fed’s next policy-making meeting, which is scheduled for September 16-17.

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