US unemployment surges to 4.3% as labor market remains in contraction

The labor market slipped deeper into trouble in August. Only 22,000 jobs were added last month, way below the 75,000 economists expected.

And unemployment shot up to 4.3%, according to the Bureau of Labor Statistics. This slowdown piles on to earlier weak reports and makes a rate cut by the Fed almost a done deal later this month.

July’s job gains got revised up by just 6,000, bringing the total to 79,000. But June’s picture got worse after BLS slashed that month’s number by 27,000, turning it into a net loss of 13,000 jobs. The pattern is brutal.

Trump fires BLS chief as new job data adds fuel

This latest report was the first since President Trump kicked out BLS Commissioner Erika McEntarfer after July’s bad numbers. He didn’t like how previous months kept getting revised down either.

In her place, he nominated E.J. Antoni, a Heritage Foundation economist who’s publicly trashed BLS data before, calling it “politically distorted.” While he waits for Senate confirmation, William Wiatrowski is acting commissioner.

“The job market is stalling short of the runway,” said Daniel Zhao, chief economist at Glassdoor. “The labor market is losing lift, and August’s report, along with downward revisions, suggests we’re heading into turbulence without the soft landing achieved.”

Hiring stayed weak across major sectors. Federal government jobs dropped by 15,000, dragging down the overall total. Private sector numbers were mixed. Health care added 31,000 jobs. Social assistance brought in 16,000.

But manufacturing and wholesale trade both lost 12,000 jobs each. That makes four months in a row where factories shed workers.

Olu Sonola, head of U.S. economic research at Fitch Ratings, said:

“The warning bell that rang in the labor market a month ago just got louder. A weaker-than-expected jobs report all but seals a 25-basis-point rate cut later this month. Four straight months of manufacturing job losses stand out. It’s hard to argue that tariff uncertainty isn’t a key driver of this weakness.”

Wages rose, but barely. Average hourly earnings went up 0.3% for the month, right in line with forecasts. The yearly raise came out to 3.7%, just short of the expected 3.8%. That’s not enough to signal any serious wage growth pressure.

Fed eyes rate cut as unemployment rate jumps

The Federal Reserve meets again on September 17, and markets are now pricing in a quarter-point cut to its benchmark rate. Fed Chair Jerome Powell and his team have been facing heat from Trump too, who wants to be the chairman himself.

There’s also tension over inflation. The Fed’s worried that Trump’s tariffs might stir up price increases again. Recent data shows inflation creeping up; not fast, but steady. That adds another layer to the Fed’s headache: slow labor growth on one side, inflation risks on the other.

Meanwhile, there was one spot with slightly better news. The household survey, which is more volatile but also more immediate, showed an increase of 288,000 people employed. But it wasn’t all good. Unemployment still rose by 148,000, and the labor force jumped by 436,000, which is what pushed the jobless rate higher. The labor force participation rate also ticked up to 62.3%.

Another metric, the broader unemployment rate, which counts people who’ve stopped looking or are working part-time when they want full-time, climbed to 8.1%. That’s the highest it’s been since October 2021. It rose by 0.2 percentage points just this month.

The BLS isn’t done yet. At 10 a.m. ET, they’re expected to release their initial estimate for annual benchmark revisions going back to March 2025. These adjustments have stirred up controversy before, especially after Covid. Response rates have dropped. Fewer businesses and agencies are filling out surveys, especially the one used for the headline job number.

Here’s how BLS does it: they publish an initial number based on early survey responses, then revise it twice as more data comes in. But Trump claims the agency has a political bias. That’s part of why McEntarfer got canned, and why he installed Antoni, who shares his distrust of official data.

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