U.S. job growth weakened dramatically in August, with the unemployment rate climbing to 4.3%—its highest level in nearly four years. The Labor Department’s report confirmed a significant softening in the labor market, effectively sealing the case for the Federal Reserve to cut interest rates later this month. In a particularly alarming sign, the report revised the data for June to show a loss of jobs, the first such decline in four and a half years, fanning fears that the economy is stalling.
Economists largely attribute the sustained slowdown in hiring since April to policies from the Trump administration, including import tariffs, an immigration crackdown, and mass firings of public workers. The weak trend was underscored by massive revisions to earlier data, which led President Trump to fire the head of the Bureau of Labor Statistics (BLS) in July after accusing her, without evidence, of manipulating the figures. The administration’s import duties have pushed the nation’s average tariff rate to its highest level since 1934, creating uncertainty and stifling business investment.
The details of the report were broadly weak. Job gains were concentrated in healthcare and social assistance, but even those sectors showed signs of strain with below-average growth. Meanwhile, manufacturing shed jobs for the fourth consecutive month, and losses were seen across wholesale trade, information, financial activities, and construction. A bright spot was wage growth, which held steady with a 3.7% annual increase, though a decline in hours worked raised concerns about future economic growth prospects.
Financial markets now overwhelmingly expect the Fed to implement a quarter-percentage-point rate cut at its upcoming meeting, with further cuts anticipated later in the year. The report sent Wall Street stocks lower, pushed the dollar down, and caused U.S. Treasury yields to fall. As one economist noted, the data raises more questions about the economic growth outlook than about the Fed’s next move, with signals pointing to a heightened risk of recession.
