Many economists say Friday’s disappointing jobs report is sending warning signals about the pace of hiring across the U.S. and the broader health of the economy.
Employers added only 22,000 nonfarm jobs in August, far short of Wall Street analyst forecasts of 80,000, while the nation’s unemployment rate rose to 4.3% — the highest level since October of 2021, when the economy was still reeling from the effects of the pandemic. In 2024, the economy added an average of 168,000 per month, labor data shows.
The job market is faltering partly because of the Trump administration’s tariffs, which have increased costs for importers and complicated business planning, as well as the rapid adoption of AI across corporate America, according to economists.
“Uncertainty makes it very, very difficult for people in companies to make decisions,” Laura Ullrich, director of economic research for North America at job-search firm Indeed and a former official at the Federal Reserve Bank of Richmond, told CBS MoneyWatch. “My former boss says that when you are driving through fog, you slow down — but if it gets thick enough, you pull over.”
The Trump administration defended its trade and other economic policies, expressing confidence they will eventually drive growth.
“President Trump’s trade deals have unlocked unprecedented market access for American exports to economies that in total are worth over $32 trillion with 1.2 billion people,” White House spokesman Kush Desai said in a statement to CBS MoneyWatch. “As these unprecedented trade deals and the administration’s pro-growth domestic agenda of deregulation and historic working-class tax cuts take effect, American businesses and families alike have the certainty that the best is yet to come.”
In response to the jobs report, President Trump on Friday posted on social media that Federal Reserve Chair Jerome Powell should have moved sooner to cut interest rates. Lower borrowing costs can stimulate job growth by driving consumer spending and making it cheaper for businesses to expand their operations.
“Jerome ‘Too Late’ Powell should have lowered rates long ago. As usual, he’s ‘Too Late!’,” the president wrote.
Here are three key takeaways from economists about the latest employment figures.
The job market is stalling
Overall hiring in August was far weaker than economists expected. More troubling, the numbers look considerably worse after stripping out the two sectors that showed some of the strongest growth in August — health care and social assistance. Health care companies created 31,000 new jobs last month, while social assistance — employers such as food banks and those providing services for disabled people, children and low-income families — added 16,000 new jobs.
But many other sectors had stagnant or even declining job growth, such as manufacturing, which shed 12,000 jobs in August, and professional and business services, which lost 17,000.
“Absent the secular gains in health care and social assistance, the cyclical categories of the private service sector (excluding health care and social assistance) have collectively turned negative on average in the past four months,” Nationwide chief economist Kathy Bostjancic said in a report Friday.
Hiring this summer was also weaker than previously thought. The Labor Department’s latest data shows employers cut 13,000 jobs in June, rather than adding 14,000 new hires as the agency had reported in its first estimate for that month. The June drop marks the first decline in monthly jobs since late 2020.
Although July payroll gains were revised up slightly, total job growth for June and July was 21,000 lower than previously reported, according to the Labor Department.
Job growth is at its lowest level in 15 years
The average monthly job gains since January represent the fewest jobs added over the first eight months of the year in 15 years, excluding the pandemic-triggered crisis period of 2020, Indeed’s Ullrich noted.
“We haven’t added this few jobs since 2010, and we have 17 million more people in the labor market than we did then,” she said. “That, to me, is a staggering headline.”
That loss of momentum in creating new jobs is raising concerns about the overall strength of the economy. The nation’s gross domestic product — the total value of goods and services — is expanding more slowly than in 2024, while inflation remains above the Federal Reserve’s annual growth target of 2%.
That combination has caused some economists to warn about the risk of the U.S. entering a period of “stagflation,” a toxic mix of high prices and weak growth. Forecasters expect Consumer Price Index data for August, which is set to be released next week, to show inflation rising at an annual rate of 2.9%, according to financial data firm FactSet.
“Concerns about the health of the economy are starting to creep in,” Seema Shah, chief global strategist at Principal Asset Management, said in an email. “Equally, a strong inflation print next week could strike new fears about a stagflationary mix.”
The Fed is highly likely to cut interest rates this month
Across the board, economists on Friday said the subpar August jobs report virtually locks in a Federal Reserve interest-rate cut when policymakers meet on Sept. 17. The question is by how much.
August hiring was so anemic that some economists now think the Fed could opt for a 0.5 percentage point cut — double the typical rate cut — in a bid to keep the job market on track. Traders now see a 10% chance of a jumbo cut and a 90% likelihood of a 0.25 percentage point reduction, according to CME FedWatch. Prior to Friday’s jobs report, the market was completely discounting a jumbo cut, the tool shows.
Some economists also think the Fed will continue trimming rates later in 2025 to counter the weak job market.
“With the weak job growth, the Fed is cleared to cut rates in September. The question is whether we get [0.25 or 0.50 percentage points],” Scott Helfstein, Global X’s head of investment strategy, said in an email. “We continue to believe the Fed will ease into the cutting cycle here with one rather than two, but there is some latitude here.”
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
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