The U.S. labor market slowed sharply in August, with job growth nearly stalling and the unemployment rate climbing to a four-year high of 4.3%, the Labor Department reported Friday.

The data reinforced fears of a weakening economy and strengthened the case for the Federal Reserve to cut interest rates later this month.

Nonfarm payrolls increased by just 22,000 jobs in August, far below expectations, after an upwardly revised 79,000 gain in July. Economists had forecast 75,000 new jobs.

The report also showed a downward revision for June, with payrolls falling by 13,000 instead of the 14,000 gain previously reported — the first monthly decline since December 2020.

Christopher Rupkey, chief economist at FWDBONDS, said: “The economy is skating as close to the edge of recession as you can get. Companies are clearly hunkering down and refusing to hire, and the blame can be traced back to Washington's economic agenda.”

Political pressures

Economists point to President Donald Trump’s tariffs, immigration crackdown, and deep government job cuts as key drags on the labor market.

Trump recently fired Bureau of Labor Statistics (BLS) commissioner Erika McEntarfer, accusing her without evidence of manipulating data. He has nominated E.J. Antoni, a critic of the agency, to replace her — a move widely questioned by economists.

On social media, Trump renewed attacks on Fed Chair Jerome Powell, writing: “Jerome ‘Too Late’ Powell should have lowered rates long ago. As usual, he's ‘Too Late!’”

Sector-by-sector trends

Healthcare added 31,000 jobs, but growth was weaker than its 12-month average of 42,000.
Social assistance rose by 16,000 positions.
Federal government payrolls shrank by 15,000 and are down 97,000 since January due to spending cuts.
Manufacturing shed jobs for the fourth consecutive month, reflecting tariff impacts.
Losses also hit wholesale trade, information, financial activities, construction, and business services.

Wages remain a bright spot. Average hourly earnings rose 0.3% in August, up 3.7% year-on-year. However, a fall in hours worked has heightened concerns over growth.

Worries over data revisions

Economists warned that upcoming revisions could reveal deeper weakness. The Bureau of Labor Statistics will publish preliminary figures Tuesday that could lower employment estimates by up to 800,000 jobs for the year ending March.

August’s payroll count could eventually be revised higher due to seasonal quirks, but the three-month average is just 29,000 jobs — a steep drop from 82,000 in the same period last year.

Wall Street stocks fell after the release, while the dollar weakened and Treasury yields declined. Traders now expect the Fed to cut rates by a quarter-point at its September 16–17 policy meeting, with two more cuts likely before year’s end.

Michael Feroli, chief economist at J.P. Morgan, said: “With the August data in hand, private hours worked look to be contracting at about a 0.5% annual rate this quarter. We remain cautious about growth prospects next quarter.”

The jobless rate edged up from 4.2% in July to 4.3%, the highest since October 2021. The household survey showed 436,000 people entered the labor force, but only 288,000 found jobs.

Economists questioned the numbers, noting that the administration’s end of temporary legal status for hundreds of thousands of immigrants may have distorted labor force data.

Long-term joblessness also increased. The average duration of unemployment rose to 24.5 weeks, the longest since April 2022, from 24.1 in July. The number of people who have permanently lost jobs also climbed.