US jobs growth stalls in August, sealing case for Fed rate cut

US job growth slowed sharply in August and the unemployment rate climbed to a near three-year high, reinforcing bets the Federal Reserve will cut interest rates later this month.Nonfarm payrolls rose by just 22,000 jobs last month, the Labor Department said on Friday, well below economists’ expectations for a 75,000 gain. July’s figure was revised up to show an increase of 79,000 jobs, while June’s payrolls were marked down, leaving hiring running at its weakest pace since early 2021. The jobless rate rose to 4.3% from 4.2% in July, its highest level since late 2021.

Friday’s data added to signs that labour market momentum is fading after years of strong gains, with economists warning the economy is now in a “stall-speed” phase. This week’s JOLTS report showed that job vacancies in July fell below the number of unemployed Americans for the first time since the pandemic – a sign of cooling demand for workers.

“The slowdown confirms that labor market conditions are loosening, and this should seal the case for the Fed to deliver a rate cut in September,” said a market economist.Hiring weakness is being attributed partly to President Donald Trump’s sweeping import tariffs and stricter immigration measures, which have squeezed supply chains and reduced the labor pool. The tariffs have pushed the average US tariff rate to its highest level since 1934, creating additional costs for businesses and contributing to the Fed’s cautious stance on rate cuts earlier this year.

Economists also noted that August payroll data often understates job growth initially, with subsequent revisions tending to show improvement. The Bureau of Labor Statistics said it faced “technical difficulties” ahead of Friday’s release, but the figures were published as scheduled.

Trump last month dismissed BLS Commissioner Erika McEntarfer, accusing her of manipulating employment data – allegations economists have rejected, saying recent downward revisions reflect the agency’s “birth-death” model, which estimates net job gains from firm openings and closures.

Treasury yields and the dollar fell after the report, while equity futures rose as traders boosted bets on a September rate cut.

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