Washington (AFP) – US job growth stalled in August while unemployment crept up to its highest level since 2021, in a closely watched report Friday after weak data earlier prompted President Donald Trump to fire a key economic official. Overall, the figures confirmed a labor market slowdown in the world’s biggest economy as businesses pull back on hiring while grappling with uncertainty sparked in large part by Trump’s fast-changing tariffs.
US job growth came in at 22,000 last month, down from July’s 79,000 figure, said the Department of Labor. The jobless rate edged up from 4.2 percent to 4.3 percent, in line with analysts’ expectations but reaching its highest level since 2021. Job growth in June, while earlier estimated at 14,000, was revised to a 13,000 decline, the report said. This was the first such decline since 2020. Hiring in July was adjusted slightly upwards.
Analysts closely monitor US employment numbers given their bearing on the Federal Reserve’s interest rate decisions — and a deteriorating labor market is seen tipping the balance in favor of rate cuts. Trump on Friday reiterated his call for Fed Chair Jerome Powell to slash rates, saying he should have done so “long ago.” Friday’s numbers are also under scrutiny after a poor showing in July’s data — released last month — prompted Trump to claim the figures were “rigged” and fire the commissioner of labor statistics.
Nationwide chief economist Kathy Bostjancic said that data revisions take place as survey response rates have declined. If companies respond late, numbers have to be updated. White House economic advisor Kevin Hassett told CNBC the latest figures were slightly disappointing but expressed hope they would be revised higher.
“The alarm bells are starting to go off in the labor market,” said Heather Long, chief economist at the Navy Federal Credit Union. “More and more industries are shedding jobs.” She noted that almost all recently added jobs were in health care. If that sector were excluded, job growth would be negative. Health care added 31,000 jobs but federal government employment declined by 15,000 — and is down by 97,000 since reaching a peak in January. Manufacturing employment dropped by 12,000 in August and dropped 78,000 over the year. Employment in the wholesale trade sector also fell.
“Increasing operating costs and acute policy uncertainty” have pushed firms to keep a tight lid on new hiring, said EY senior economist Lydia Boussour. She added that tariffs and uncertainty are significantly hitting goods-producing sectors. Average hourly earnings rose 0.3 percent in August, as they did in July. “The ‘no hiring’ economy is turning to a layoff economy and if that worsens, it will lead to a recession,” Long warned.
Trump’s stop-start approach to rolling out tariffs has snarled supply chains and made it tough for businesses to plan their next moves. Many firms said they have been forced to put growth plans on hold. A Briefing.com consensus forecast expected US hiring at 78,000 in August. The cooldown in hiring has been notable, with payroll gains averaging 168,000 in 2024.
“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 Bostjancic. Fed officials are holding their next policy meeting from September 16-17, and Powell has previously opened the door to lowering rates. “The real question now becomes how many rate cuts follow,” Bostjancic said. Since its last reduction in December, the Fed has held interest rates steady at a range between 4.25 percent and 4.50 percent as policymakers observed the impact of tariffs on inflation.
A weakening jobs market could support the need for lower rates to boost the economy. “This is not a picture of an economy at ‘maximum employment,'” said Mortgage Bankers Association chief economist Mike Fratantoni. But he added that the pace of any additional cuts will be “tempered by the ongoing risk of a pickup in tariff-induced inflation.”
© 2024 AFP
