Job market is struggling

Trump's job market is struggling, building the case for steeper Fed rate cuts

The report comes as both elevated interest rates and Trump’s sweeping tariffs weigh on an economy that depends on consumer spending.

By Victoria Guida

The U.S. job market is showing signs of stalling, a troubling trend for the economy that strengthens the case for the Federal Reserve to begin slashing interest rates.

The Labor Department on Friday said businesses added just 22,000 jobs in August, the fourth disappointing monthly report in a row. The June numbers were also revised down to show that the U.S. actually lost 13,000 jobs that month — the first time that has happened since December 2020. Unemployment ticked up to 4.3 percent, the highest in four years.

And in a further blow to President Donald Trump, manufacturers continued to shed jobs, with employment down by 78,000 this year despite the administration’s drive to promote investment and growth in that corner of the economy.

The report comes as both elevated interest rates and Trump’s sweeping tariffs weigh on an economy that depends on consumer spending. For the first time since 2021, there are now more unemployed Americans than there are open jobs — even as the president’s immigration crackdown reduces the supply of workers.

“The impact of tariffs on hiring was undeniable,” said Joseph Brusuelas, chief economist at RSM.

White House economic adviser Kevin Hassett, in an interview on CNBC, called the numbers “a bit of a disappointment” but noted that August is a month that often has larger revisions. He also cited growth in business investment as “exactly what you want to see.”

Despite the gloomy report, there is some upside for Trump. Not only does this increase the odds that the Fed will lower short-term interest rates by a larger amount this year, but longer-term yields — which are a key driver of mortgage rates — also dropped on the news.

The Fed had been holding off on rate moves as it assesses how much tariffs are pushing up prices and how much they are slowing growth. But Chair Jerome Powell signaled last month that the central bank is now more worried about deterioration in the labor market than he is about tariffs leading to sustained inflation, suggesting a rate cut is likely in September.

But he was cautious on signaling whether further cuts might be on the way. Now, pressure could grow for a jumbo cut this month, or a series of cuts.

It’s unclear how worrisome August’s number is because demand for employees has been slowing alongside Trump’s immigration crackdown, which has also reduced the supply of available workers.

“We are in the dark here on how healthy 22,000 truly is,” said Daniel Zhao, chief economist at Glassdoor. But, “it gives us less buffer” against any economic slowdown, he said.

“There had been some optimism that the unemployment rate might stay relatively flat as job growth shrinks,” Zhao added. “This does point to a more concerning weakening.”

For his part, Trump said the “real numbers” would come a year from now, when job growth would be “absolutely incredible.”

“You’re gonna see job numbers like our country has never seen,” he told reporters Thursday evening.

Some analysts said uncertainty over both rate cuts and tariffs was hurting the economy, especially manufacturers.

“The August jobs report should hopefully spur on two important actions,” Alliance for American Manufacturing President Scott Paul said in a statement. “First, a cut in interest rates by the Federal Reserve. Second, concluding tariff actions and trade deals to provide businesses with the certainty they need to hire, invest in new capital equipment, and realign supply chains. Manufacturing will be treading water until we see those changes.”