August jobs report seals fate of labor market as stagnant, increasing odds of rate cut

With the U.S. jobs report for August having been released on September 5th, investors are panicking long-term regarding the economic vitality of a nation inflicted with heavy tariffs on imports, but were also complimented by higher than ever chances for an interest rate cut as early as September.

A "NOT HIRING" sign with translation in Spanish, Bart Everson/Flickr.

In the September 5th jobs report from the U.S. Bureau of Labor Statistics, the U.S. economy added a lackluster 22,000 jobs in August, far below the expectation by analysts which was roughly 75,000. This caused the unemployment rate to tick up 0.1% to 4.3%, up from the previous month's 4.2% and becoming the highest unemployment rate since October 2021. This data coincides with revisions showing that June's numbers were significantly overestimated while July saw marginal change.

The only gains in jobs in August came from industries such as healthcare (31,000) and social assistance (16,000). However, falls in jobs were attributed to the Trump administration's continued layoffs and budget cuts (-15,000), manufacturing (-12,000), mining, and fossil fuel extraction. The very same administration promised that tariff implementation would bring back manufacturing jobs to the United States, with this outcome still not coming into fruition.

Among the 7.4 million individuals that were registered as unemployment according to payroll numbers, the unemployment rate of adult men was 4.1%, for adult women 3.8%, for teenagers 13.9%, for whites 3.7%, for African-Americans 7.5%, for Asian-Americans 3.6%, and for Hispanic-Americans 5.3%. Only the Hispanics number saw minimal change compared to the month prior.

David Kelley from JPMorgan Asset Management described the new results as "ouch," emphasizing that economic growth may be losing momentum, reflected by other datapoints like inflation and previous job growth revisions by the BLS.

Olu Sonala from Fitch Ratings provided a similar perspective to the situation, warning that the "warning bell that rang in the labor market a month ago just got louder..."

For many investors, though, the increased odds of a Fed rate cut gave them some optimism. Now, according to the betting odds, it is almost certain that the Federal Reserve will pursue some kind of interest rate cut of at minimum 25 basis points. As of Wednesday, investors betted av average 90.2% chance of a rate cut on September, according to CME FedWatch.