Payrolls rose 22,000 in August in further sign of hiring slowdown

The August jobs report released by the Bureau of Labor Statistics showed a disappointing increase of just 22,000 nonfarm payrolls, well below economists’ expectations of 75,000. This marked a significant slowdown from the previous month’s increase of 79,000, which was revised upward by 6,000. Additionally, revisions showed a net loss of 13,000 jobs in June after a downward adjustment of 27,000.

Daniel Zhao, chief economist at Glassdoor, described the job market as “stalling short of the runway,” indicating a concerning trend of weakening labor market conditions. Despite the lackluster job growth, average hourly earnings increased by 0.3% for the month, meeting expectations. However, the annual gain of 3.7% fell slightly below the forecasted 3.8%.

The report also highlighted a decline of 15,000 jobs in the federal government, while the healthcare sector added 31,000 jobs and social assistance contributed 16,000. Wholesale trade and manufacturing both saw declines of 12,000 jobs each during the month.

Market reactions to the report were mixed, with stocks rising at the open and Treasury yields falling sharply. Futures markets indicated a 100% probability of a quarter percentage point interest rate cut by the Federal Reserve later in the month, with a 12% chance of a half-point cut.

The disappointing jobs report comes amidst growing expectations of a Fed rate cut as policymakers express concerns about a slowdown in hiring and potential inflationary pressures from trade tariffs. Fed officials have been under pressure from President Donald Trump to lower interest rates, with the last cut occurring in December 2024.

While the establishment survey showed weak job creation, the household count used to calculate the unemployment rate provided slightly better news. The report indicated an increase of 288,000 employed individuals, though the ranks of the unemployed also rose by 148,000. The broader measure of unemployment, including discouraged workers and part-time employees, climbed to 8.1%, the highest level since October 2021.

Looking ahead, the BLS is set to release annual benchmark revisions to the numbers dating back one year from March 2025. Revisions have been a point of contention, especially in the post-Covid era, as response rates have declined. The firing of former BLS Commissioner Erika McEntarfer following the July jobs report release has drawn criticism from the economics and markets community.

In a CNBC interview, National Economic Council Director Kevin Hassett expressed optimism that the August payrolls count would be revised higher, citing past trends of revisions in the past three years. The upcoming revisions will provide a clearer picture of the labor market’s health and the potential impact on future Fed decisions.