The U.S. labor market showed renewed signs of strain in August as private-sector employers added just 54,000 jobs, according to payroll processor ADP, falling short of economists' forecasts and marking one of the weakest monthly gains in more than a year.
The figure undershot expectations of 65,000 to 75,000 new jobs, according to surveys from Reuters and Dow Jones, and represented a sharp slowdown from July's revised increase of 106,000. "The year started with strong job growth, but that momentum has been whipsawed by uncertainty," Nela Richardson, ADP's chief economist, said Thursday.
Richardson cited consumer concerns, labor shortages, and disruptions tied to artificial intelligence as possible factors behind the slowdown. Sector-level data showed steep declines in trade, transportation, and utilities, which lost 17,000 jobs, and education and health services, which shed 12,000. Those losses were partially offset by gains in leisure and hospitality, which added 50,000 positions.
Wage growth remained steady. Employees staying in their jobs saw 4.4% annual pay increases in August, while job switchers reported a 7.1% bump, according to ADP.
Other indicators painted a similar picture of a cooling labor market:
- Jobless claims: rose to 237,000 last week, up 8,000 from the prior period and above estimates.
- Layoffs: employers announced 85,979 job cuts in August, a 39% jump from July and the highest August total since 2020, Challenger, Gray & Christmas reported.
- Job openings: government data showed July marked the first time since the pandemic that unemployed workers outnumbered available positions.
Economists noted that President Donald Trump's sweeping tariffs and immigration crackdowns have contributed to hiring pressures, particularly in construction and restaurants. The Federal Reserve's "Beige Book" released Wednesday also said firms were "hesitant to hire workers because of weaker demand or uncertainty."
Markets are now focused on Friday's government employment report. Economists expect nonfarm payrolls to rise by 75,000 in August, roughly in line with July's 73,000 gain. The unemployment rate is projected to tick up to 4.3% from 4.2%.
Federal Reserve Chair Jerome Powell has acknowledged that labor market risks are increasing even as inflation remains elevated. The Fed has held its benchmark interest rate at 4.25%-4.50% since December. Traders are nearly unanimous in betting the central bank will cut rates at its Sept. 16-17 meeting, with the CME FedWatch tool showing a 97.4% probability.
