Job growth stalls: US economy added just 22,000 jobs in August and unemployment rose to highest level since 2021

CNN

By Alicia Wallace, CNN

(CNN) — The US job market is stalling out.

Job growth slowed to a crawl in August, and the unemployment rate rose to its highest level in nearly four years, indicating the US labor market is growing stagnant.

The economy added just 22,000 jobs last month and the unemployment rate rose to 4.3% from 4.2%, according to the Bureau of Labor Statistics.

August’s job report also included a downward revision to June, which showed the US economy lost 13,000 jobs that month. It’s the first negative employment month since December 2020, and it brings to an end what was the second-longest period of employment expansion on record.

“The Great American jobs machine has stalled,” Christopher Rupkey, chief economist at FwdBonds, wrote in commentary issued Friday.

July’s job gains were revised up slightly to 79,000 from 73,000, according to the report.

Economists were expecting that the economy added 76,500 jobs last month and that the unemployment rate rose to 4.3%, according to FactSet.

The Dow rose 119 points, or 0.26%, Friday morning. The S&P 500 rose 0.41% and the tech-heavy Nasdaq gained 0.63%, after the weaker-than-expected jobs data boosted expectations that the Federal Reserve will cut interest rates in September to stimulate the economy.

Uncertainty stymies hiring

Through August, monthly job gains average 74,750, BLS data shows. Excluding the pandemic, that’s the slowest average monthly gain for that January to August time frame since 2010, when the United States was still licking its wounds from the Great Recession.

“The addition of just 22,000 jobs in August, along with net downward revisions of previous months, shows an economy straining under the immense economic uncertainty and significant policy changes of 2025,” Laura Ullrich, Indeed’s director of economic research for North America, wrote Friday.

Uncertainty has swelled since the beginning of the year in large part around how President Donald Trump’s sweeping policies on tariffs, immigration and federal spending would shake out through the economy.

Hiring efforts, already stymied in part by still-high interest rates, have been largely shelved due to the unknowns.

“They don’t know where things are going, whether it’s through tariffs or other dynamics – interest rates still aren’t coming down – so I think a lot of companies are just saying, ‘not now,’” Ron Hetrick, senior labor economist at employment analytics company Lightcast, told CNN in an interview. “I think there’s somebody probably out there who’d like to hire, but not in this environment.”

“They’re waiting for more certainty to occur,” he said.

Narrow job growth means fewer opportunities

The low-hire, low-fire environment is leaving workers and job hunters with few opportunities.

And more workers are seeking those opportunities, as labor market re-entrants helped to lift the unemployment rate last month.

The labor force, which shrank for three months in a row, increased by 436,000 people in August, according to BLS data. The labor force participation rate moved higher as well, ticking up to 62.3% from 62.2%.

While the majority of those labor force gains were from those classified as employed, the increase in those unemployed was largely attributed to those who re-entered the labor market and are searching for jobs.

“In fact, the median time looking for work slipped to a three-month low, a bright spot in a generally weak jobs report,” Jennifer Timmerman, senior investment strategy analyst at Wells Fargo Investment Institute, wrote in a note to investors Friday.

A low-churn labor market puts the US labor market — and the broader economy — at greater risk, economists warn.

The limited job gains also are coming from practically a single source, exacerbating those concerns.

The US job market is being propped up primarily by ongoing employment gains in the health care industry. That sector, which has attributed for the lion’s share of overall job growth this year, added 46,800 jobs in August.

That sector, however, accounts for just 15% of total employment, meaning many people are left on the sidelines.

“For 85% of workers, they’re not seeing a lot of the jobs added,” Kory Kantenga, LinkedIn’s head of economics Americas, told CNN this week.

And wage gains are increasingly growing softer. The annual growth rate of average hourly earnings slowed to 3.7% in August, from 3.9% in July.

Without broader-based employment growth, the labor market is more vulnerable to shocks, he said.

“If anything happens to that industry, you could easily see job growth fall off a cliff.”

Warning signs have been flashing for months that the job market has been losing steam. That became starkly clearer in July, when weak job growth and larger-than-typical downward revisions spurred the unprecedented firing of BLS Commissioner Erika McEntarfer by President Donald Trump who claimed, without evidence, that the disappointing data must have been “rigged.”

Other labor market data released so far this week further confirmed that the labor market has cooled down considerably: Private-sector hiring slowed sharply; initial jobless claims hit a nearly three-month high; layoff announcements picked up; and, for the first time in four years, the number of available jobs was lower than the number of job seekers.

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CNN’s John Towfighi contributed reporting.