Labor Market Stalled This Summer, With August Data Adding to Slowdown

After persevering through years of high interest rates and wild swings in economic policy, the labor market appears to be sputtering, in a slowdown that could build on itself as consumers lose confidence and pull back on spending.

Employers added only 22,000 jobs in August, well below the number that forecasters had expected. The unemployment rate rose very slightly to 4.3 percent, showing both that business’ appetite for new recruits and the number of available job-seekers have faded in the last several months.

The economy has been cooling since its red-hot pandemic peak as the Federal Reserve worked to tame inflation, and has more recently been buffeted by a barrage of tariffs and other disruptive actions by the Trump administration.

Employers haven’t been letting go of workers in large numbers, but employees have also been hanging on tightly to their jobs. That leaves little room for anyone entering the job market for the first time, or trying to get back in after losing work.

“Once you turn negative, you usually do so rapidly,” said Diane Swonk, chief U.S. economist for the accounting firm KPMG. “When the pace of hiring, the pace of layoffs and the pace of quits are so low, there’s very little margin for error.”

The August report solidified a reality that suddenly became apparent last month when job growth for the early summer was revised down substantially. With more employer surveys in, it now appears that the economy subtracted jobs in June, the first negative number since December 2020, with the Covid-19 pandemic still raging.