Sluggish job growth in August: U.S. economy only adds 22,000 positions amidst cooling labor market

In a recent development, the US job market has shown signs of slowing down, with the addition of only 22,000 jobs in August, significantly lower than the revised 79,000 jobs added in July and the expected 75,000 jobs. This sluggish growth is a cause for concern, particularly as it marks a significant deviation from the average job growth of 123,000 in the first four months of the year.

The labour market's red ink is a concern, as it was the first red ink seen since December 2020 at the height of the Delta wave of coronavirus. Diane Swonk at KPMG stated that the labour market is starting to freeze. This slowdown is particularly evident in trade-exposed sectors, as per Carrie Freestone, an economist at Royal Bank of Canada. The August figure was dragged down by job losses in wholesale trade, manufacturing, and energy and mining sectors - industries that are exposed to the President's levies.

The report dealing with US employment will be a blow to US President Donald Trump, who has been vocal about his dissatisfaction with the Federal Reserve and its chief Jerome Powell for not cutting rates so far this year. Trump has sharply criticized the Fed for not taking action to stimulate the economy. However, Steve Englander, global head of G10 currency research at Standard Chartered, stated that a bumper half-percentage point interest rate cut would now be a "serious consideration" for the Fed.

Before the jobs data, futures markets were pricing in a quarter-point move. However, traders are now betting there is more than a 10% chance of an extra-large half-percentage point cut at the Fed meeting later this month. The two-year yield tumbled 0.11 percentage points to 3.48 per cent after the payroll figures were released, indicating a shift in market expectations.

The job loss of 13,000 in June was revised, marking the first time the economy has shed positions since the coronavirus pandemic in 2020. The labour market is moderating significantly more than the Fed expected at the start of the year, as per Gennadiy Goldberg, head of US rates strategy at TD Securities.

EJ Antoni, the new head of the U.S. Bureau of Labor Statistics (BLS) after the previous commissioner was fired last month, will be responsible for releasing the September jobs report. Antoni, known for his prior role as chief economist at the conservative Heritage Foundation, was confirmed by the U.S. Senate as BLS head in August 2025.

The sluggish job growth and the falling stocks have led to a wave of uncertainty in the market. Wall Street stocks fell, with the blue-chip S&P 500 down about 0.8 per cent. US Treasuries surged in price after the payroll figures were released, as investors ratcheted up bets that the Fed will soon begin cutting rates again. Employment in tariff-exposed sectors has been hit hard by the trade turmoil.

The Federal government payrolls also continued to slide, shedding another 15,000 jobs to leave the sector down by 97,000 since January as the Trump administration slims down government agencies. The jobless rate increased to 4.3% in August from 4.2% the previous month. Job growth in healthcare, the sector that had been driving gains in recent months, also slipped to its weakest level since January 2022.

This news of a slowing job market and falling stocks is a concerning sign for the US economy. The Fed's decision on interest rates later this month will be closely watched as investors and economists anticipate a potential half-percentage point cut to stimulate the economy.