Michelle ThompsonAugust’s report indicated a slowing labor market, showing job losses for the first time since 2020 – here’s what it revealed.
A key US jobs report released on Friday pointed to a slowing labor market.
In August, the economy added only 22,000 jobs, falling short of expectations, while the unemployment rate edged up slightly to 4.3%, according to the Bureau of Labor Statistics. Earlier this year, job growth had regularly exceeded 100,000 per month.
Amid Donald Trump’s trade wars, tariffs on most foreign goods have driven prices higher. This uncertainty appears to have unsettled businesses, and the combination of weaker job growth and rising inflation casts a shadow over the US economic outlook.
Here’s what Friday’s report revealed:
Employment drops for the first time since 2020
Friday’s jobs report included revisions to the initial figures for June and July. June’s job growth, originally reported at 139,000, was revised down to a loss of 13,000 jobs—the first decline in the labor market since December 2020, during the height of pandemic-related unemployment. July’s numbers were adjusted slightly upward, from 73,000 to 79,000.
Revisions are a routine part of the Bureau of Labor Statistics’ data process, but they became a source of tension with the White House after last month’s dramatic adjustments. Initial reports had overstated job growth for May and June by 258,000, which the bureau explained was due to receiving additional employer reports after its surveys. With Friday’s updates, the combined revisions for May, June, and July lowered total job counts by 279,000.
Last month, President Trump dismissed the bureau’s commissioner, Erika McEntarfer, following the revisions, claiming the data was “rigged” against him and the Republican Party. Economists, however, emphasize that the bureau relies on career statisticians, many with long-standing experience.
Job losses occurred in government and manufacturing roles.
The effects of the so-called “Department of Government Efficiency” are still apparent, even though Elon Musk has largely stepped back from involvement in Trump’s White House. Federal employment fell by another 15,000 jobs in August, bringing total federal job cuts since January to 97,000.
Manufacturing has also been affected, with 12,000 jobs lost in August and 78,000 over the past year.
On the other hand, healthcare and social assistance sectors saw job gains, adding 31,000 and 16,000 positions, respectively.
Unemployment rates for Black Americans have increased.
In August, the unemployment rate for Black Americans rose 0.3 percentage points from the previous month to 7.5%—more than twice the rate for white and Asian Americans, which sits just above 3.5%. Hispanic Americans also saw higher unemployment at 5.3%.
While the overall unemployment rate increased only 0.1% over the past year, Black unemployment climbed 1.4%, whereas rates for white and Asian Americans slightly declined.
Historically, Black Americans have been “last hired, first fired” during economic downturns, meaning they are often the most affected and slowest to recover. This pattern was evident during the Great Recession, when Black and Hispanic communities experienced disproportionately high unemployment.
The Federal Reserve is likely to lower interest rates in September.
Federal Reserve officials have indicated that a rate cut could happen at the next board meeting on September 16–17, though it is expected to be modest. Investors drew optimism from last month’s Jackson Hole speech by Fed Chair Jerome Powell, in which he suggested that officials may ease interest rates in response to concerns about the labor market.
However, a rate cut does not signal that the Fed views the economy as fully stable. Officials, including Powell, have expressed worry over rising prices caused by Trump’s tariffs. It remains uncertain whether inflation will continue to climb or if the increases are a one-time effect of the tariffs.
For now, Powell emphasized that the Fed is primarily focused on labor market conditions, which August’s report showed have been uneven this summer.
White House encourages Americans to back Trump’s plan
On Thursday, before Friday’s jobs report release, Trump said that “the real numbers” will be reported next year.
“The real numbers that I’m talking about are going to be whatever it is, but will be in a year from now,” he said. “You’re going to see job numbers like our country has never seen.”
When asked about the hiring slump, the national economic council director, Kevin Hassett, told CNBC on Friday that “you are seeing that people are being hired”.
“Members of my family have been hired,” he said. “Both of them started their new jobs about a week ago.”
Hassett called the jobs report “disappointing” but said that the numbers will eventually go back up.
In a separate interview on Friday, the US commerce secretary, Howard Lutnick, told CNBC that the jobs reports will be better once the administration makes changes to the Bureau of Labor Statistics.
“You’ll take out the people who are just trying to create noise against the president,” Lutnick said. He added that Americans will see “the greatest growth economy … starting six months from today to a year from today”.
