Chicago – September 05, 2025
U.S. job growth weakened sharply in August while the unemployment rate increased to nearly a four-year high of 4.3%, confirming that labor market conditions were softening and sealing the case for an interest rate cut from the Federal Reserve this month.
The Labor Department’s closely watched employment report on Friday also showed the economy lost jobs in June for the first time in 4-1/2 years. Job growth has shifted into stall-speed, with economists blaming President Donald Trump’s sweeping import tariffs and an immigration crackdown that has reduced the labor pool. Softness in the labor market is mostly coming from the hiring side. There were more unemployed people than vacancies in July for the first time since the COVID-19 pandemic.
Nonfarm payrolls increased by only 22,000 jobs last month after rising by an upwardly revised 79,000 in July, the Labor Department’s Bureau of Labor Statistics said. Economists polled by Reuters had forecast payrolls would rise by 75,000 positions after a previously reported gain of 73,000 in July. Estimates ranged from no jobs added to 144,000 positions created.
Revisions also showed payrolls declined by 13,000 jobs in June, the first drop since December 2020, rather than rising by 14,000, as had been reported last month.
The unemployment rate increased from 4.2% in July, in part due to more people entering the labor force.
Some of the sharp job growth slowdown last month could be tied to a seasonal quirk. The initial August job count has tended to exhibit a weak bias, with revisions subsequently showing strength. Nonetheless, employment growth has softened considerably, averaging 29,000 jobs per month in the last three months, compared to 82,000 during the same period in 2024.
The bulk of the jobs added in August were in healthcare, with payrolls in the sector rising 31,000. But even this pillar of the labor market is showing strain as the increase was below the average monthly gain of 42,000 over the last 12 months.
