In a September 5 report on job growth from the Bureau of Labor Statistics (BLS), U.S. employers added only 22,000 jobs in August, a significant slowdown, and the unemployment rate rose slightly to 4.3%—a sign that the economy is rapidly cooling as global tariffs put pressure on U.S. businesses.
The report included a downward revision for June, noting that the U.S. labor market lost 13,000 jobs that month, much lower than a previous estimate of 14,000 jobs added. This marked the first monthly job loss since December 2020.
Job growth was minimal last month in healthcare and decreased in federal government and mining sectors, leading to stagnant job growth and an increase in unemployed people compared to job openings. This trend shows a slowing labor market, with employers hesitant to hire and job openings falling to a 10-month low.
Total nonfarm payroll employment has shown little change since April. The unemployment rate, at 4.3%, also changed little in August. A job gain in healthcare was partially offset by losses in the federal government and in mining, quarrying, and oil and gas extraction.
This new jobs report is being scrutinized because it’s the first one following the poor jobs data last month that prompted President Trump to fire BLS commissioner Erika McEntarfer. It was a maneuver that drew pushback from economists, with worries that important independent data might become less reliable. Trump nominated economist E.J. Antoni to be the new head of the BLS. Longtime BLS leader William Wiatrowski is acting commissioner until Antoni is confirmed.
Trump continued to cast doubt on BLS data yesterday, according to multiple media reports, saying that “real” jobs numbers will come next year. “They come out tomorrow, but the real numbers that I’m talking about are going to be whatever it is, but will be in a year from now on,” Trump said at a dinner with tech executives.
The unsettling jobs report could help the Fed decide on a rate cut at its next meeting, which would in turn likely help lower mortgage rates, improving the housing market nationally.
“The labor market is not the only economic area with a shifting balance,” said Realtor.com® Chief Economist Danielle Hale. “Home sales activity and the housing market generally remain stuck as a formerly red-hot sellers’ housing market has balanced. Homebuyers grapple with a lack of affordability, sellers contend with more competition and builders deal with lower buyer demand.”
Hale indicated that while these conditions haven’t spelled catastrophe, they have created a tough summer market in which many are unhappy, each in their own way.
“Looking ahead, ongoing wage growth is one of three keys needed to restore homebuyer affordability. In fact, research shows that despite the general loss of buying power due to higher mortgage rates nationwide, a handful of metro areas actually saw homebuying power tick modestly higher for the typical household due to exceptional income growth.”
Bright MLS Chief Economist Lisa Sturtevant warned that even with an upcoming rate cut, homebuying hopefuls should not try to time rates.
“They certainly should not expect the Fed’s decision itself to materially impact mortgage rates in the short-term,” she said. “People who want to buy and are financially ready to do so should take advantage of more inventory and more opportunities for negotiating. Sellers in most markets are starting to reset expectations on pricing and are prepared to negotiate in a way they have not over the past few years.
“But there is still a wildcard out there. We will get August inflation data next week. Inflation has been stuck around 2.7% this summer, slightly higher than where it was in the spring and still above the Fed’s stated target of 2%. If the data show rising inflation in August, the Fed’s decision will be complicated. It will be important to watch how the bond market responds to today’s jobs report and upcoming economic data releases. With weaker labor market conditions reported today, expect bond yields to fall, potentially pushing mortgage rates lower. However, if inflation expectations remain high, bond yields could remain high, keeping mortgage rates elevated, even with a Fed cut.”
MBA SVP and Chief Economist Mike Fratantoni noted that “While the headline unemployment rate increased to 4.3%, what was more notable was more workers only able to find part-time work or becoming discouraged by the lack of job openings, and the continued increase in the length of unemployment spells. While the pace of layoffs has picked up somewhat, the hiring rate remains quite low. It is increasingly difficult for those laid off, and for new entrants into the job market, to find a position.
“The slowdown in the job market should be more than enough for the FOMC to cut its short-term rate target, as this is not a picture of an economy at ‘maximum employment,’ and the greater risk now appears to be that the job market will slip further in the months ahead. The pace of any additional cuts will certainly be tempered by the ongoing risk of a pickup in tariff-induced inflation.”
The full jobs report can be found here.
