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Warning signs have been flashing for months that the labor market has been losing steam. Friday’s closely watched jobs report is unlikely to offer any redemption.
So far this week, fresh employment metrics have shown that first-time claims for unemployment benefits rose to an 11-week high; private-sector businesses sharply reined in their hiring last month; and August was the worst month since the Great Recession (excepting the pandemic era).
“The labor market is showing signs of cracking,” Heather Long, Navy Federal Credit Union senior economist, wrote Thursday. “It’s not a red siren alarm yet, but the signs keep growing that businesses are starting to cut workers.”
The August jobs report, set for release at 8:30 a.m. ET Friday, is expected to show another month of tepid job gains but an unemployment rate that holds steady at 4.2%. Economists have forecast that the economy added 80,000 jobs last month, which would be a slight increase from the slower-than-expected 73,000 net gain in July.
The July jobs report, and the downward revisions that came along with it, hit like a ton of bricks and triggered some extracurricular drama in the process.
The month’s 73,000 estimated jobs added were well below the 115,000 net gain expected and half the size of June’s preliminary tally. As for May and June’s gains, those were drastically slashed by a combined quarter of a million jobs.
Following those revisions, the three-month average was just 35,000 jobs added. Outside of the massive job losses during the onset of the pandemic, that’s the slowest pace of job creation seen in nearly 15 years, Bureau of Labor Statistics data shows.
When all was said and done, President Donald Trump fired BLS Commissioner Erika McEntarfer, claiming, without evidence, that she manipulated the numbers for “political purposes.” (Revisions are a “feature, not a bug” of economic data, and there are explanations for what happened in May and June — more on that below).
Trump’s nominee for the BLS commissioner, Heritage Foundation economist E.J. Antoni, stirred plenty of controversy and drummed up fears of political influence on critical economic data. He has yet to appear before the Senate for a confirmation hearing.
In the meantime, the task of overseeing the collection of employment data has fallen to Acting Commissioner William Wiatrowski, who has served in leadership roles at the BLS for more than two decades.
Friday’s jobs report is expected to provide some additional and much-needed clarity on the health of the nation’s labor market, the bedrock for the US consumer and the economy.
“You’re definitely seeing a slowing in the labor market, a pretty marked slowing,” Dan North, Allianz Trade’s senior economist for North America, told CNN in an interview.
Through July, the US economy has added about 85,300 jobs per month. For the comparable periods in 2024, 2023 and 2022, that tally was roughly 153,300, 240,400, and 466,850, respectively.
Slower job growth has long been expected. The nation’s labor market was coming down from pandemic-era hiring highs and supposed to be settling into a new normal.
However, it remains to be seen whether the current low-hire, low-fire environment that has left workers and jobseekers with few opportunities is a concerning stalling-out or something more structural entirely.
“The slight uptick in July’s still-low unemployment rate suggests that labor supply has slowed nearly in tandem with labor demand, keeping the overall market — as [Federal Reserve Chair Jerome] Powell described in his Jackson Hole speech — in a ‘curious kind of balance,’” Seema Shah, chief global strategist at Principal Asset Management, wrote in a Wednesday note.
“As such, the disappointing payroll figures may not signal outright labor market deterioration but rather reflect an economy that requires fewer new jobs to maintain stable employment levels,” she added.
Labor supply has been shrinking in part because of an aging workforce as well as reduced immigration flows. At the same time, the Trump administration’s whipsaw tariff policy has injected substantial uncertainty into the economy, paralyzing some businesses’ hiring plans in the process.
“Employers have been tightening their purse strings to cope with uncertainty in the economic outlook,” Elizabeth Renter, senior economist at NerdWallet, wrote Wednesday. “This means holding back on hiring they might otherwise do. Fortunately, thus far, it’s also meant holding back on layoffs.”
New data Thursday provided some additional evidence that a broad-based slowdown in hiring is sweeping the US labor market.
Payroll company ADP’s latest monthly employment report showed that US private-sector businesses added an estimated 54,000 jobs in August, nearly half the 106,000-job gain reported for July.
“The year started with strong job growth, but that momentum has been whipsawed by uncertainty,” Nela Richardson, chief economist at ADP, said in a statement. “A variety of things could explain the hiring slowdown, including labor shortages, skittish consumers, and AI disruptions.”
The lion’s share of the gains came from leisure and hospitality businesses, which added an estimated 50,000 jobs last month, ADP said. Construction and professional and business services also added jobs (at 16,000 and 15,000, respectively). Jobs were shed in industries such as trade, transportation and utilities; education and health services; and manufacturing.
Still, layoff activity hasn’t been drastically accelerating.
Separate data released Thursday showed that there were an estimated 237,000 first-time claims for unemployment benefits filed in the week that ended August 30, an increase of 8,000 from the week before, according to Department of Labor data.
The weekly jobless claims report is the highest-frequency federal data that’s the closest proxy for layoff activity.
First-time claims for unemployment insurance have remained in a narrow range since mid-June and are still running below where they were at last year, painting a “reasonably optimistic picture” of the labor market, Abiel Reinhart, JPMorgan economist, wrote last week.
The continuing claims data, however, has continued to bump up against nearly four-year highs, indicating that it has not been easy for unemployed people to find work.
That was reinforced earlier this week with the latest Job Openings and Labor Turnover Survey data. At the end of July, for the first time in more than four years, there were fewer job openings than there were job seekers, BLS data showed.
At the same time, the July JOLTS report showed that hires, quits and layoffs didn’t budge much at all.
Still, there are some indications that a pickup in layoff activity could come in the months ahead.
In August, US-based employers announced plans for 85,979 layoffs, an increase from the 62,075 announced in July, according to Challenger, Gray & Christmas’ latest job cut tracking report released Thursday.
By Challenger’s count, outside of the recent pandemic, it was the worst August since the Great Recession for layoff announcements.
“After the impact of [Department of Government Efficiency cuts] on the federal government, employers are citing economic and market factors as the driver of layoffs,” Andrew Challenger, senior vice president of Challenger, Gray & Christmas, wrote in a statement. “We’ve also seen a spike in cuts due to operation or store closings and bankruptcies this year compared to last.”