Hello, my friends!
In what was, by a country mile, the week’s most prominent data release, the Labor Department revealed on Friday that nonfarm payrolls increased by a positively anemic 22,000 jobs in August…well below both the 75,000 jobs projected by economists and the 79,000 jobs added in July.
As for the unemployment rate itself, that ticked up 0.1 percentage point to 4.3%…the highest it’s been in nearly four years.
The fresh numbers are just the very latest sign of rapidly growing weakness in the labor market; a weakness that already was widely expected to prompt a quarter-point rate cut later this month and which now, following this latest jobs report, may have some policymakers considering a reduction by 50 basis points.
It wasn’t just the feeble August data that added to the consternation over the condition of the labor market. The report also contained a troubling downward revision to the figures for June, revealing that instead of gaining 14,000 jobs that month, the economy actually suffered a net loss of 13,000 jobs…the first outright decline since December 2020.
Major indexes fell only modestly on Friday in the wake of the news. The consensus view is that while markets obviously are concerned about what the jobs numbers say about the economy, they’re anticipating that growing signs of labor-market weakness all but ensure a rate cut by the Fed this month. For the week, the Dow Jones Industrial Average was down 0.32%, but both the S&P 500 and Nasdaq Composite finished in the black, up 0.33% and 1.14%, respectively.
Also this week:
Unemployed Outnumber Available Jobs for the First Time Since Pandemic
Other widely followed labor-market metrics released earlier in the week also implied that the jobs picture may, indeed, be in the process of darkening some.
On Wednesday, the Labor Department released the latest edition of its Job Openings and Labor Turnover Survey – also known as the JOLTS report – which revealed not only that U.S. job openings fell to a 10-month low in July, but also that the number of unemployed Americans exceeded the number of available jobs for the first time since the pandemic.
According to the report, job openings in July dropped by 176,000, to 7.181 million, the lowest since September 2024 and roughly 40% below where they were at three years ago.
Of particular note is the 181,000 fewer job openings in the areas of health care and social assistance recorded in July. This marks the second straight month these sectors have seen a decline in available positions, which some observers regard as especially concerning given the degree to which job growth in these areas have buttressed the overall job market recently.
Private-Sector Jobs Number for August Reflects Pervasive Concerns About Economy
The following day, Thursday, ADP checked in with its contribution to the week’s gloomy updates on the jobs market, reporting that the private sector created just 54,000 jobs in August. That’s well below the 75,000 jobs projected by economists and significantly below the 106,000 jobs added in July.
Although ADP’s data has proved to be an unreliable predictor of the government’s nonfarm payrolls numbers which routinely follow in subsequent days, analysts say the bigger, more important issue is that each of the nation’s highest-profile labor-market gauges has reflected noticeable weakening over the course of the year so far.
“The year started with strong job growth, but that momentum has been whipsawed by uncertainty,” said Nela Richardson, chief economist of ADP. “A variety of things could explain the hiring slowdown, including labor shortages, skittish consumers, and AI disruptions.”
Whatever the culprit(s), this week’s ADP report added more fuel to the growing rate-cut fire, with Jamie Cox, managing partner for Harris Financial Group, noting:
“ADP data continue to reinforce the narrative that the rate of positive change in the labor market has slowed significantly, so you can expect the Fed to tilt its balance of risks to cut rates in September.”
Manufacturing Sector Remained in Contraction Last Month
In other news this week, the Institute for Supply Management reported on Tuesday that its Manufacturing Purchasing Managers’ Index increased modestly in August, but not enough to lift the widely followed metric out of the contraction territory in which it’s persisted since March.
According to ISM’s numbers, Manufacturing PMI increased by 0.7 percentage point last month to come in at 48.7. Although technically an improvement, the result isn’t much to crow about; the reading is two-tenths of a point less than economists were expecting and marks the sixth straight month its landed below the key level of 50 that distinguishes contraction from expansion in the nation’s manufacturing sector.
The overall index might have seen a bigger gain last month if not for largely offsetting results from two critical component measures: the New Orders and Production Indexes. While the New Orders Index jumped a little more than four points in August to land at 51.4 and squarely back in expansion, the Production Index fell by nearly the same increment, pushing that metric into contraction.
Comments from survey respondents indicate that volatile tariff policy…along with associated uncertainty in the broader economy…is making life difficult for U.S. producers, with one manufacturer saying:
“Orders across most product lines have decreased. Financial expectations for the rest of 2025 have been reduced. Too much uncertainty for us and our customers regarding tariffs and the U.S./global economy.”
Fed Beige Book Tells Tale of Impending Slowdown
Finally this week, the Federal Reserve on Wednesday published the sixth of eight Beige Books scheduled for release in 2025, with its contents seeming to underscore the growing economic uncertainty generated by the White House’s aggressive tariff policy.
Beige Books contain more qualitative – even anecdotal – information about economic conditions across all 12 Fed districts. The insights are gathered through interviews with business contacts and other key observers in each district. Beige Books…so called because of the color of their covers…are published two weeks before each meeting of the Federal Open Market Committee and consulted by central bank officials as they consider how to proceed with monetary policy.
Among the highlights of this most recent edition was an acknowledgment by the Fed that there was “little or no change in economic activity since the prior Beige Book period,” along with suggestions that evidence of a tariff-induced slowdown is revealing itself.
“Nearly all districts noted tariff-related price increases, with contacts from many districts reporting that tariffs were especially impactful on the prices of inputs,” the Federal Reserve said. Relatedly, the central bank also revealed that “across districts, contacts reported flat to declining consumer spending because, for many households, wages were failing to keep up with rising prices.”
Observers say that while the latest Beige Book serves as additional confirmation of a looming slowdown, it likely won’t make much difference to Fed policymakers who likely have already decided that a rate cut of between 25 and 50 basis points is in order when they meet again on September 16.
That’s all for now; have a terrific weekend!This post is created and published for general information purposes only. The Gold Strategist blog disclaims responsibility for any liability or loss incurred as a consequence of the use or application, either directly or indirectly, of any information presented herein. Nothing contained in this post – or any other post featured at this blog – should be construed as a solicitation or recommendation to engage in any financial transaction. You should seek the advice of a qualified professional before making any changes to your personal financial profile.
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