Labour pains: US August payrolls highlight sluggish market

US job figures for August saw non-farm payrolls rise a modest 22,000, with little difference since April, while the jobless rate held steady at 4.3%. 

The 47,000 roles added by healthcare and social assistance were more than offset by losses in federal government, wholesale trade, and mining. 

Manufacturing also trimmed headcount, with transportation equipment hit particularly hard by strike activity.

Wages continued to creep higher, with average hourly earnings increasing 0.3% in August and are up 3.7% year-on-year. Altogether, the data reflects an economy producing demand for labour, but the August payrolls print have underlined just how sluggish the US labour market has become.

Help wanted

Speaking of today's figures, President Trump told reporters on Thursday: “They come out tomorrow, but the real numbers that I’m talking about are going to be whatever it is, but will be in a year from now on.”

Following July’s report, when only 73,000 jobs were added and earlier months were slashed by a whopping 258,000, Trump reacted swiftly. The president fired Bureau of Labor Statistics commissioner Erika McEntarfer despite experts arguing such revisions are routine. Some have pointed to a lag in the submission of the relevant data as the cause of what was a larger-than-usual revision.

Since then, job openings have dropped sharply, while unemployment claims have crept up. No doubt Trump’s tariffs and restrictive immigration policy have disrupted labour supply, especially in sectors like manufacturing and construction. 

The Fed’s Beige Book – which logs changes in economic conditions, published eight times a year – points to a slowdown in employment activity.

Hire anxiety

Tariffs haven’t spiked inflation significantly. But they’ve not done labour markets any favours, either. 

Against a backdrop of softening growth and steady inflation (2.7%), analysts expect the jobs figures to pressure a rate cut, with most forecasters pricing in a 25 basis-point cut in the Fed’s mid-September meeting.

Weak hiring numbers tend to push bond yields lower, which can lift growth stocks and weigh on the dollar. Stronger jobs, by contrast, keep pressure on yields and borrowing costs. If payrolls surprise to the upside, borrowing stays expensive and bond yields climb, which can drag on equity valuations.

Investors would do well to remember that payroll numbers are snapshots, built on partial data. Around half of surveyed businesses respond after the initial report, so early figures rely heavily on modeling to fill the gaps. Estimates often get revised by tens of thousands of jobs over the following two months. In the past few months, revisions have been unusually large, larger than at almost any point outside COVID or the 2008 financial crisis. 

What matters is the longer-term trend, whether the labour market is gradually cooling and how that shapes the Fed’s path on rates.

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