US Job Growth Plunges in August as Unemployment Rises to Three-Year High

The U.S. labor market weakened significantly in August, with job growth nearly stalling and unemployment climbing to its highest level since 2021, according to data released Friday. The report came just weeks after President Donald Trump dismissed a senior economic official following disappointing employment figures in July.

The Department of Labor said the economy added just 22,000 jobs last month, a steep drop from the 79,000 recorded in July. The unemployment rate ticked up from 4.2% to 4.3%, matching analyst forecasts but reaching a level not seen in three years.

The report also revised June’s employment figures from a gain of 14,000 to a loss of 13,000 — the first decline since 2020. Hiring in July was revised slightly higher.

Economists view the cooling labor market as increasing pressure on the Federal Reserve to cut interest rates at its next policy meeting on September 16–17. “The fourth month of sub-par employment performance signals a dramatic stall in hiring and fully supports the Fed starting rate cuts at the next meeting,” said Kathy Bostjancic, chief economist at Nationwide.

President Trump renewed his calls for Fed Chair Jerome Powell to lower rates, saying cuts “should have been done long ago.”

Weak hiring across industries

The data showed that most job growth in August came from health care, which added 31,000 positions. Excluding that sector, overall job growth would have been negative, said Heather Long, chief economist at Navy Federal Credit Union.

Meanwhile, federal government employment fell by 15,000, part of a broader decline of 97,000 jobs since January. Manufacturing shed 12,000 positions in August and has lost 78,000 over the past year, while wholesale trade employment also decreased.

“Increasing operating costs and acute policy uncertainty” are forcing businesses to hold back on hiring, said Lydia Boussour, senior economist at EY, adding that tariffs have particularly hurt goods-producing industries.

Average hourly earnings rose 0.3% in August, the same pace as in July.

Warning signs

“The alarm bells are starting to go off in the labor market,” Long said. “More and more industries are shedding jobs. The ‘no hiring’ economy is turning into a layoff economy and if that worsens, it will lead to a recession.”

Analysts noted that payroll gains are averaging 168,000 in 2024, highlighting a sharp slowdown compared to previous years. A Briefing.com consensus forecast had expected hiring to reach 78,000 in August, far higher than the actual figures.

Trump’s unpredictable tariff policies have added to the uncertainty, disrupting supply chains and leaving businesses hesitant to expand. Many companies report putting investment and hiring plans on hold.

Fed officials are now weighing how many rate cuts may be needed. Since lowering rates in December, the central bank has kept borrowing costs steady at 4.25%–4.50%.

“This is not a picture of an economy at ‘maximum employment,’” said Mike Fratantoni, chief economist at the Mortgage Bankers Association, though he cautioned that the pace of future rate cuts may be limited by the risk of tariff-driven inflation.