Mixed news on US jobs: Unemployment rate falls but hiring is slowing

Stocks closed lower Friday as investors continued to parse the latest jobs data.

The Dow fell 410 points, or 1%. The S&P 500 declined 1.7% and the Nasdaq Composite lost 2.6%.

All three major indexes logged their worst week this year.

The US economy added 142,000 jobs last month, below economists’ expectations but still a rebound from July’s downwardly revised 89,000 number. The unemployment rate ticked lower to 4.2% from 4.3%, according to the Bureau of Labor Statistics.

Investors had hoped for more clarity on whether the Federal Reserve will cut rates by a quarter- or half-point at its September policy meeting. But while some investors say that the data has set the stage for a quarter-point cut, others believe that a half-point cut could still be in play.

Traders see a 69% expectation that the Fed will ease rates by a quarter-point later this month, according to the CME FedWatch Tool.

Wall Street will look to the latest Consumer Price Index report due next week for more clues about the Fed’s next move.

As stocks settle after the trading day, levels might change slightly.

Commuters walk in a subway station in New York City on June 6.

Many businesses across America aren’t planning on cutting?jobs?sharply anytime soon, the?Federal Reserve?said in a report released Wednesday.

Employers “reduced shifts and hours, left advertised positions unfilled, or reduced headcounts through attrition—though accounts of layoffs remained rare,” said the?Fed’s latest Beige Book report, a semi-quarterly collection of economic anecdotes from around the country. In the Boston?Fed’s district, which spans across the New England region, “firms did not plan to expand their workforces moving forward, but no major layoffs were planned either,” according to the report. Such was the case in the New York?Fed’s district, which the report noted that “there are no signs of major layoffs on the horizon.”

The US job market is now running at a much slower pace than in recent years. Wall Street and the?Fed?are watching closely for any signs that the labor market is deteriorating, such as a notable pickup in layoffs. Job cuts are a normal occurrence in any?economy. On any given month, there are more than a million layoffs in the United States, according to a monthly Labor Department report gauging churn in the job market. In July, there were 1.76 million layoffs and discharges.

Layoffs are concerning whenever they rise higher than usual, driving up?unemployment, but so far, so good: Not only do new applications for?unemployment?benefits remain historically low, but the Beige Book also doesn’t suggest an incoming tsunami of layoffs — at least not yet.

The stock selloff accelerated midday Friday as investors waffled over the latest jobs report and what it means for the Federal Reserve.

The Dow fell 433 points, or 1.1%. The S&P 500 declined 1.8% and the Nasdaq Composite tumbled 2.6%.

Traders see a 77% expectation that the Fed will cut rates by a quarter point, according to the CME FedWatch tool. Still, some investors say that a half-point cut is still on the table.

Donald Trump and Kamala Harris speaking at campaign events in Potterville, Michigan, and Savannah, Georgia, respectively, on August 29. Any signs of a shift in the economy's trajectory could force them to tweak their messaging.

The jobs report will draw much more attention than usual this month. That’s partly because there’s a Federal Reserve policy decision on the way in less than two weeks, but also because we’re closing in on a presidential election.

Fresh data on the nation’s job market could force the presidential candidates to recalibrate their message on inflation, which voters have repeatedly told pollsters is their top concern.

For former President Donald Trump and the Republicans, the narrative is simple: Anything bad you’re feeling about inflation or the job market? That’s the Biden administration’s fault.

For Vice President Kamala Harris, who moved to the top of the Democratic ticket in late July, the message about the economy has had to be more nuanced, recognizing consumers’ legitimate frustrations about high prices and inflation, while touting Democrats’ success in keeping the labor market afloat and avoiding a recession.

But while inflation has now eased, it has come at a cost: The labor market, while still historically strong, is finally feeling the sting of the Fed’s aggressive interest rate hikes. That’s why both candidates’ campaigns are highly attuned to Friday’s report.

Read more here.

Think Friday’s jobs report is bad news? How about a little perspective….

A few years ago, America was in the middle of a historic inflation crisis. At one point, consumer prices were growing more than 9% a year.

To combat that, the Federal Reserve hiked interest rates — at a rapid pace — to a two-decade high. It largely worked: Inflation is now growing at an annual rate of below 3% and is closing in on the Fed’s 2% target.

But there’s an (intended) consequence to rate hikes: They slow the economy down. Rate hikes increase the costs of doing business and hurt profitability. That tends to slow down hiring, which means fewer jobs and less money for consumers to spend. Because consumer spending makes up the vast majority of America’s economy, the Fed almost always plunges the economy into a recession when it hikes rates — although that’s obviously not the goal.

The fact that America is not in a recession after years of high rates is nothing short of extraordinary. Until recently, hiring kept on booming and consumers kept on spending — largely because pandemic-era stimulus hadn’t quite worn off yet and because many homeowners locked in ultra-low mortgage rates that freed up cash.

Now, the job market is showing signs of stress. But the fact that America’s economy is still gaining jobs at a healthy clip is exactly the “soft landing” scenario we were all hoping for (and doubting could be achieved) when the Fed started jacking up rates a couple years ago.

It’s too early to declare victory, but it sure looks like this is a best-case scenario, considering where we were a couple years back.

U.S. Federal Reserve Chair Jerome Powell holds a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington on July 31.

In the lead-up to the Federal Reserve’s next policy meeting on September 17-18, several central bankers have commented on how it’s appropriate to cut rates soon. But few have indicated when.

For instance, at the Fed’s Jackson Hole economic symposium last month, Chair Jerome Powell said, “The time has come for policy to adjust.” Though he didn’t explicitly say it, investors took that to mean the September meeting.

Then on Friday, hours after the August jobs report was released, Fed Governor Christopher Waller took Powell’s comments further, saying, “I believe the time has come to lower the target range for the federal funds rate at our upcoming meeting.”

Waller also said he’s anticipating “a series” of rate cuts, adding that he’s “open-minded about the size and pace” of them.

The August jobs report, which showed employers hired 142,000 new workers and the unemployment rate ticked down to 4.2% from 4.3%, “supported the story of ongoing moderation in the labor market,” Waller said Friday, speaking at an event hosted at the University of Notre Dame.

Left: Republican presidential nominee and former U.S. President Donald Trump on September 4 in Harrisburg, Pennsylvania. Right: U.S. President Joe Biden at the White House in Washington on September 3.

Presidential terms don’t start and end in a vacuum, and economic cycles can carry over regardless of party. Additionally, the ups and downs of the labor market and the broader economy are influenced by factors beyond a single president (although specific economic policies can influence economic and job growth).

When Trump took office in 2017, he inherited a strong economy, including a robust labor market, which was in the throes of its longest-ever expansion that started in 2010 and continued until March 2020, when the Covid-19 pandemic crippled global economies, including that of the US.

In 2016, the US added an average of nearly 194,000 jobs per month, according to Bureau of Labor Statistics data. In the two years before, those average gains were even higher: 226,000 in 2015 and nearly 250,000 in 2014.

Job gains remained above historical averages in 2017 through 2019, with 177,000 jobs added on average per month.

Nearly 22 million jobs were lost under Trump in March and April 2020 when the global economy cratered on account of the pandemic. Following substantial relief and recovery measures, the US started regaining jobs immediately, adding more than 12 million jobs from May 2020 through December 2020, according to Bureau of Labor Statistics data.

The recovery continued after Biden took office, with the US reaching and surpassing its pre-pandemic (February 2020) employment totals in June 2022.

The job gains didn’t stop there. Since June 2022, the US has added nearly 6.4 million more jobs in what’s become the fifth-longest period of employment expansion on record. In total under Biden, 16.26 million jobs have been added.

The effects of the Covid-19 pandemic make it difficult to have an apples-to-apples comparison between the two administrations.

When trying to strip out the pandemic effects, one could compare the job gains starting in July 2022 (as the US returned to pre-pandemic employment levels in June 2022) through August 2024, to the 26-month period of July 2017 to August 2019: From July 2022 through August, there were 6.4 million jobs added, or roughly 247,300 jobs per month; and from July 2017 to August 2019, there were 4.6 million jobs added, or more than 175,600?jobs per month.

People pass the New York Stock Exchange on Wednesday, September 4.

Stocks turned lower Friday mid-morning as investors continued to look over the latest jobs report.

The Dow fell 175 points, or 0.4%. The S&P 500 slid 1% and the Nasdaq Composite declined 1.7%.

All three major indexes are on pace to end the month lower.

Some of the biggest gains last month came in health care (+44,100), leisure and hospitality (+46,000) and construction (+34,000).

The largest job losses took place in manufacturing, which shed an estimated 24,000 positions in August. Retail trade, which posted losses for the third consecutive month, was down by 11,100; and information saw an estimated 7,000-job drop, according to the report.

In July, economists speculated the jobless rate was lifted by short-term influences, particularly weather-related impacts and seasonal auto plant shutdowns in Michigan. The July jobs data showed the number of workers on temporary layoff shot to 1.06 million from 813,000 the month before.

In August, that figure not only cooled back down to 872,000, but the labor force grew, with nearly 70,000 new entrants looking for work.

John C. Williams, President and CEO of the Federal Reserve Bank of New York, speaks at the Milken Institute's Global Conference at the Beverly Hilton Hotel on May 6 in Beverly Hills, California.?

The August jobs report is “consistent with a slowing economy and cooling off in the labor market,” New York Federal Reserve President John Williams said Friday shortly after the data was released.

The report showed employers hired 142,000 new workers versus expectations of 160,000 and the unemployment rate fell from 4.3% to 4.2%. Additionally, July employment gains were revised down to 89,000, the lowest monthly job gains since December 2020, when employers laid off 243,000 workers.

Speaking at an event hosted by the Council on Foreign Relations in New York, Williams hinted that the data will put the central bank on track to cut rates at its upcoming meeting this month. He holds a permanent vote on the Fed’s monetary policy committee and is seen as a close adviser to Fed Chair Jerome Powell.

People walk by the New York Stock Exchange in the Financial District of New York City on August 5.

Stocks edged higher Friday morning as Wall Street reviewed the August jobs report.

Fresh data showed that hiring recovered in August. The US economy added 142,000 jobs last month, below economists’ expectations but still a bounce back from July’s downwardly revised 89,000 number. The unemployment rate ticked lower to 4.2% from 4.3%.

The Dow rose 46 points, or 0.1%. The S&P 500 gained 0.2% and the Nasdaq Composite added 0.2%.

Investors say the data likely means the Federal Reserve will cut interest rates by a quarter-point at its meeting later this month. But some also say that the Fed could consider a bigger half-point cut in a bid to get ahead of risks to the US economy before they appear.

Traders see a 53% chance of a quarter-point cut in September, according to the CME FedWatch Tool. Expectations for a half-point cut are now at 47%.

Federal Reserve Chairman Jerome Powell speaks at a news conference following a Federal Open Market Committee meeting at the William McChesney Martin Jr. Federal Reserve Board Building on July 31 in Washington, DC.

The latest?jobs?report has somewhat quieted the small crowd calling on the?Federal Reserve?to roll out a jumbo interest rate cut later this month.

It’s now roughly a coin toss for Wall Street whether the?Fed?cuts by a half point or a quarter point: As of 9 am ET, investors saw a 51% chance of a half point cut, versus a 49% chance of a quarter point, according to the futures market.

US employers added 142,000?jobs?in August, a sharp pickup from July’s downwardly revised total, and the?unemployment?rate edged lower to 4.2% from 4.3%. Those numbers are nothing to scoff at, showing that America’s job market is, at the very least, holding up for now.

The bar for the?Fed?to cut?rates?by a jumbo-sized half point at the conclusion of its policy meeting on September 18 was already high — and it depended on a disastrous August?jobs?report.

That bar was not met, but that’s certainly good news for American workers.?While an ailing job market would usher in lower borrowing costs, that would also mean employers are laying off workers.

“A softer-than-expected?jobs?report may support those in favor of a 0.5% rate cut on September 18, but the jury is likely still out,” Chris Larkin, managing director, trading and investing, at E-Trade, said in a note Friday.

“For now, a 0.25% cut remains the baseline case for a cautious?Fed. In the meantime, markets are likely to be sensitive to any other data that suggests the?economy?is cooling off too much.”

A pedestrian walks along Wall Street near the New York Stock Exchange along Broad Street on September 3.

Here’s how Wall Street is reacting to the jobs data.

Stock futures declined Friday morning after the latest jobs report.

Dow futures rose 0.05% and S&P 500 futures gained 0.07%. Nasdaq-100 futures lost 0.1%.

The US economy added 142,000 jobs last month, showing that hiring rebounded. But July’s weak number that helped sparked recession fears was revised down to 89,000.

Treasury yields fell as investors parsed the report.

A "We Are Hiring" sign advertising job openings is viewed outside of a store in the Chinatown neighborhood of Boston on July 10.

How’s this for confusing?

America’s job market rebounded in August: The economy added a healthy 142,000 jobs last month, and the unemployment rate fell.

BUT: Hiring was significantly weaker in June and July than initially believed. The US economy created just 89,000 jobs in July, the weakest since the last full month of the Trump administration. And that’s on top of historic revisions that revealed the economy created more than 800,000 fewer jobs between mid-2023 and mid-2024 than previously reported.

So what do we make of this?

Friday’s consequential jobs report shows that America’s job market is fine. There’s no need to hit that panic button. We’re not in a recession. America is still creating a healthy number of jobs.

But it also shows that the job market is showing signs of stress. The average number of jobs the US economy created has fallen in each year of the Biden administration: from 604,000 in 2021 to 377,000 in 2022 to 251,000 in 2023 to the sub-200,000 level we’re in now.

A lot of that is normal economy stuff: It’s slowing because it can’t possibly keep up the pace of hiring from the post-pandemic boom. Plus: Punishingly high interest rates have slowed inflation — but also hiring. Concerns about a slowing economy have given employers pause, and they’re scaling back on hiring. Fewer workers are quitting their jobs out of fear that they may not find another one.

All this means the job market remains on a knife’s edge: The Federal Reserve is set to start cutting rates in a couple of weeks to help boost the economy. But we’re just one or two bad jobs reports away from a very different narrative about the state of America’s economy.

The July jobs report was already flashing red-hot warning signs after it brought the unemployment rate to 4.3%, the highest level since October 2021. On top of which, monthly job gains came in much lower than expected, at 114,000.

But with the release of the August jobs report, which showed the unemployment rate fell to 4.2% and 142,000 new jobs were added, the Bureau of Labor Statistics revised July’s gains down to 89,000. That’s the lowest monthly job gains since December 2020, when employers laid off 243,000 workers.

The BLS also revised down June jobs gains to 118,000 from 189,000.

The latest revisions give the Federal Reserve more urgency to cut interest rates to stave off more serious stressors in the labor market.

Construction workers start their day as the sun rises on a building in Carmel, Indiana, on August 27.

The US labor market picked back up in August, allaying recession fears triggered by a surprisingly weak?employment?report the month before.

Employers added an estimated 142,000 jobs last month, marking stronger growth than July’s worrisome low number that was revised down by 25,000 to 89,000, according to data released Friday by the Bureau of Labor Statistics.

Economists were expecting a net gain of 160,000?jobs?and for the?unemployment?rate to fall to 4.2%, according to FactSet consensus estimates.

Just one month ago, a weak jobs report set off a flurry of recession fears on Wall Street.

Another weak report today could bring those fears back.

And it could force the Federal Reserve to come to the rescue by making its first rate cut since Covid a big one. It would be much better if the Fed is able to just gradually cut rates, from a position of strength.?

US Treasury Secretary Janet Yellen speaks at Wake Tech Community College East Campus on September 5 in Wendell, North Carolina.?

US Treasury Secretary Janet Yellen said Friday that a monthly gain of 142,000 jobs is considered “a very healthy, sustainable pace — which is what we want to see over time.”

At an event in Austin, Texas, she acknowledged that the job market “has slowed somewhat,” but said “I still see it as quite healthy, and I thought today’s report confirmed it,” according to a report from Bloomberg.

At a visit to a community college in Raleigh, North Carolina, on Thursday, the former Federal Reserve chair said she was not concerned about America’s job market.

“The job market has become less tight within the last year or so, but the?unemployment?rate we have today by historical standards would be considered very low,” Yellen told reporters Thursday. “My judgment is that we have a good, healthy labor market where we continue to create?jobs.”

She added that the labor market “doesn’t look like it’s a source of inflationary pressure,” according to WRAL.

Traders work on the floor of the New York Stock Exchange during morning trading on September 4.

Here’s what Wall Street has to say as it awaits the latest jobs report:

Wall Street is bracing itself for Friday’s juggernaut jobs report, which could impact the size of the long-awaited first rate cut this cycle from the Federal Reserve and create some breathing room for companies and households dealing with the highest interest rates in 23 years.

Traders initially priced in six rate cuts for this year, but after nine months there has still been no movement from central bankers. That is expected to change in less than two weeks, when the Fed is expected to introduce a rate cut now that inflation has been brought down to more manageable levels.

Dow futures were 140 points lower Friday morning, S&P 500 futures were down 0.6% and futures tied to the tech-heavy Nasdaq were down 1%.

Treasury yields also fell, with the 10-year reaching its lowest level this year.

A hiring sign is displayed at a retail store in Schaumburg, Illinois, on July 10.

Economists are expecting the August jobs report to reaffirm that the labor market is merely cooling versus outright weakening.

Consensus estimates are for a net gain of 160,000 jobs, a solid increase from July’s estimated 114,000 gain, and for the unemployment to dip to 4.2%, according to FactSet estimates.

But forecasting is far from an exact science — especially since the pandemic threw all rules and data out of whack — so the official report could prove to be monumental in determining the health of not just the labor market but the economy as a whole.

And, not to mention, it’s coming at a critical time for the economy: The Federal Reserve?is expected to shift gears this month on monetary policy?and enact the first rate cut since the central bank started its inflation-fighting tightening cycle 30 months ago.

The Marriner S. Eccles Federal Reserve building seen on August 25 in Washington.

The labor market may not be on the verge of an imminent collapse, but it likely cannot withstand any more months of 23-year-high interest rates.

That’s according to a Wednesday blog post from Nick Bunker, economic research director for North America at the Indeed Hiring Lab.

“The labor market is no longer cooling down to its pre-pandemic temperature… it’s dropped below it,” he wrote. “The labor market is past moderation and trending toward deterioration. The Federal Reserve has indicated that it has shifted some attention away from inflation and toward the health of the labor market, which is good, but it needs to take action soon.”

But even if rates start moving downward as soon as this month, it not only may take some time before the labor market feels it but also there’s still plenty of lagging monetary policy that still needs to be worked off, said Oliver Allen, senior US economist at Pantheon Macroeconomics.

“As much as the Fed might not want to see more deterioration, the simple fact is they have already raised rates a very long way, left rates at a high level for quite a while, and monetary policy obviously operates at a lag,” he said. “So, I think some further deterioration is already in the pipeline.”

The US Treasury building in Washington, DC, on August 29.

Recession fears reignited when the July jobs report came in far weaker than expected and unemployment shot up to 4.3%.

The latter triggered the “Sahm Rule,” an indicator developed by economist Claudia Sahm that posits a recession is imminent or underway if the three-month moving average of the unemployment rate rises by 0.5 percentage points or more relative to its prior 12-month low. Since January, it has risen by 0.6 percentage points.

Rules can be broken, and Sahm herself wrote in an opinion piece for Bloomberg that the US is not in a recession and that her indicator “joins a long list of economic tools skewed by the unusual disruptions of the past four and a half years.”

Then there’s the yield curve, which briefly uninverted Thursday and Wednesday in intraday trading. The spread between 2- and 10-year Treasury yields has closed consistently negative (or inverted) since early July 2022, according to Tradeweb data.

Inversions are typically rare and have long been viewed as recession indicators.

Also, history doesn’t look favorably on the last two times interest rates were this high, noted Chris Rupkey, chief economist at FwdBonds.

“The last two times the Federal Reserve had interest rates at this high of a level, their first rate cuts were [half-point cuts] before the 2001 recession and then the Great Recession,” he wrote. “There are signs of a slowdown in hiring with fewer job openings, but until payroll jobs actually decline there is no recession. At the moment, it does not look like the Fed is behind the curve and can proceed with a regular [quarter point] rate cut.”

A person waits in a line for a prospective employer at a job fair, on Thursday, August 29, in Sunrise, Florida.

Beyond the topline payroll and unemployment numbers, there are several other metrics within Friday’s jobs report that could show the direction of travel:

Hours worked: The length of the average workweek is viewed as an economic bellwether. If businesses experience a drop-off in demand, they’ll typically cut hours before making more drastic moves. The average workweek fell slightly in July to 34.2 hours from 34.3 hours.

Labor force movement: The number of people re-entering the labor force to look for work shows underlying sentiment about the strength of the jobs market; however, it does bump the unemployment rate higher.

Temporary layoffs: Part of the rise in July unemployment reflected a spike in temporary layoffs that was the third largest since 2000 (excluding Covid), wrote Bank of America economists in an investor note Wednesday. The economists cautioned that these “could turn permanent. However, they said they expect this trend to have been reversed in the August report, noting the increase was likely driven by the “summer auto retooling-related volatility in Michigan.”

Weather effects: In the July jobs report, the BLS noted that Hurricane Beryl “had no discernible effect” on the national employment and unemployment data. However, the weekly jobless claims data has shown some increases in unemployment, particularly in Texas, Mike Skordeles, head of US economics at Truist, told CNN. “We know that there were distortions there,” he said.

Fresh data released Thursday suggests that some companies — and the tech industry in particular — moved forward with layoffs last month.

US-based employers announced 75,891 job cuts in August, according to a monthly report released Thursday by outplacement and research firm Challenger, Gray & Christmas. That’s a sharp upswing from July’s 12-month low of 25,885.

However, when compared to August 2023, last month’s announcements were only 1% higher, Challenger noted.

“August’s surge in job cuts reflects growing economic uncertainty and shifting market dynamics,” said Andrew Challenger, senior vice president at Challenger, Gray & Christmas. “Companies are facing a variety of pressures, from rising operational costs to concerns about a potential economic slowdown, leading them to make tough decisions about workforce management.”

Technology firms accounted for more than half of the announced job cuts. Of those 39,563 tech cuts, 5,943 were attributed to artificial intelligence, according to the Challenger report.

People wait in line to attend a job fair on Thursday, August 29 in Sunrise, Florida.

As the labor market has slowed, it has come back into balance: There are now nearly 1.1 jobs available for every person looking for one. That ratio, which peaked at 2.03 in March 2022, hasn’t been this slim in more than three years.

Although the easing of job gains is something that has been expected, fears have grown recently that the labor market isn’t simply bending under the weight of Federal Reserve inflation-busting interest hikes — but it’s actually breaking.

The monthly jobs report for July showed gains of just 114,000 — far below expectations — and the unemployment rate shot to 4.3% from 4.1%. Separately, annual labor market data revisions showed job gains for the year ending March 2024 were less robust than initially thought.

“The July jobs report was obviously a big turning point in terms of perceptions of the labor market and the near-term prospects for the economy,” Allen said.

Concurrently, inflation has greatly subsided, putting the Federal Reserve just weeks away from what is likely the first interest rate cut since the central bank began its inflation-busting tightening cycle more than two years ago.

While the labor market may not be the deciding factor for a deeper Fed cut at the end of the month, it certainly adds to the case, said Robert Frick, corporate economist at Navy Federal Credit Union.

“The labor market continues to soften and is about back to pre-pandemic levels; the question is, does the trajectory continue and threaten the expansion, or will it level off?” Frick said.