U.S. Job Growth Stalls in August, Unemployment Rises to Nearly Four-Year High

U.S. job growth slowed sharply in August, with the unemployment rate climbing to 4.3%—its highest level in nearly four years—underscoring growing cracks in the labor market and strengthening expectations that the Federal Reserve may cut interest rates this month.

Friday’s closely watched Labor Department report also revealed that the economy lost jobs in June for the first time in four-and-a-half years. Economists largely blame the slowdown on President Donald Trump’s sweeping tariffs and immigration policies, which have tightened labor supply and weighed on hiring.

The weakness is most evident on the hiring side. For the first time since the pandemic, July saw more unemployed workers than job vacancies.

Trump’s tariffs, which have pushed average U.S. duty rates to their highest since 1934, have fueled inflation concerns and forced the Fed to pause its rate-cutting cycle. While some trade uncertainty eased as most duties took effect, a U.S. appeals court ruling last week invalidating several tariffs has added fresh unpredictability for businesses.

“The warning bells we saw a month ago in the labor market are ringing louder now,” said Olu Sonola, head of U.S. economic research at Fitch Ratings. “Even as inflation drifts further from the Fed’s 2% target, policymakers may feel compelled to prioritize labor market stability. It’s hard to argue that tariff uncertainty isn’t central to this weakness.”

Nonfarm payrolls rose by just 22,000 last month, following a revised gain of 79,000 in July, the Bureau of Labor Statistics said. Economists polled by Reuters had expected 75,000 new jobs. June data was also revised to show a loss of 13,000 jobs—the first decline since December 2020—compared with an initially reported gain of 14,000.

The unemployment rate edged up from 4.2% in July, partly reflecting more people entering the labor force.

Some of the August weakness may be seasonal. Payroll growth is often soft in preliminary August estimates before strengthening in later revisions. Still, the slowdown has been pronounced: job gains have averaged just 29,000 per month over the past three months, compared with 82,000 during the same period in 2024.

Most new jobs last month came from healthcare, which added 31,000 positions—below the sector’s 12-month average of 42,000. Social assistance gained 16,000 jobs, but both industries are showing strain, with government data this week reporting a slowdown in hiring.

Federal government payrolls shrank by 15,000 in August and are down 97,000 so far this year. More cuts are expected in October as temporary census workers roll off payrolls. Jobs also declined across wholesale trade, manufacturing, construction, and professional and business services.

White House economic adviser Kevin Hassett told CNBC the numbers were “a little disappointing” but expressed optimism they would improve.

Fed Chair Jerome Powell signaled last month that rate cuts could be on the table at the central bank’s Sept. 16–17 policy meeting, acknowledging rising risks to the labor market but warning that inflation remains a concern. The Fed has held its benchmark rate steady at 4.25%-4.50% since December.

The jobs report sent Treasury yields lower and weighed on the dollar against a basket of currencies.

Data Disputes and Revisions

The figures come amid controversy over the reliability of labor statistics. Trump last month dismissed Bureau of Labor Statistics (BLS) Commissioner Erica MacEntarfer, accusing her—without evidence—of manipulating jobs data. That followed steep downward revisions to May and June payrolls.

Economists, however, defended MacEntarfer and pointed instead to the BLS’s “birth-death” model, which estimates job creation or loss from business openings and closures.

“We’re in a less turbulent labor market, with fewer large-scale hires or layoffs,” said Ernie Tedeschi, director of economics at Yale’s Budget Lab. “That means job growth is being driven more by net new business formation. But that’s also the most model-dependent part of the data, and the most vulnerable to revisions.”

The BLS is due to release preliminary benchmark revisions on Tuesday, covering employment through March. Based on available quarterly census data, economists expect job counts to be revised down by as much as 800,000.

Meanwhile, Trump has nominated E.J. Antoni, chief economist at the Heritage Foundation and a frequent BLS critic, to replace MacEntarfer. Antoni has even suggested suspending the monthly jobs report—an idea that economists across the political spectrum have dismissed as unworkable.