Another Ugly Jobs Report in the Trump Economy

For the second straight month, President Donald Trump received an ugly jobs report. Following widespread concerns that the US labor market was deteriorating rapidly, the Bureau of Labor Statistics published data indicating that economic conditions might be worsening for workers nationwide. Still, the August numbers offered some kernels of optimism.

No Good, Rotten, Ugly August Jobs Report

The headline numbers in the August jobs report were not good. The US economy created 22,000 new jobs, far below the consensus forecast of 75,000 and down from the previous month's upwardly revised 79,000. The unemployment rate ticked up to 4.3%, in line with market estimates. Average hourly earnings rose 0.3% month-over-month and eased to 3.7% year-over-year – both readings matched economists' expectations. The labor force participation rate edged up to 62.3%, while average weekly hours remained unchanged at 34.2.

At the same time, the household survey portion of the monthly jobs report, which interviews individuals and eliminates duplication, showed the number of employed people surging by 288,000.

Still, underneath the hood, figures were not any better and continued the year-long trend.

First, revisions. Oh, the humanity! More revisions. Employment gains for July were revised up by 6,000, to 79,000. However, changes in total nonfarm payroll employment for June were adjusted lower again by 27,000, confirming the country lost 13,000 jobs. So far this year, downward revisions have totaled more than 400,000.

Second, the character of payroll growth did not suggest an economy firing on all cylinders. Health care and social assistance accounted for virtually all the employment gains, rising by 31,000 and 16,000, respectively. Manufacturing shed 12,000 jobs, wholesale trade positions fell by 12,000, and mining, quarrying, and oil and gas extraction lost 6,000 individuals. The good news is that federal government employment maintained its downward trend by eliminating 15,000 jobs and adding to the 2025 tally of 97,000.

Third, the number of new entrants into the labor force declined by 199,000 to 786,000. These are unemployed individuals who are pursuing their first job. The number of long-term unemployed (people jobless for 27 weeks or more) was flat at 1.9 million but has surged by 385,000 over the year. The number of individuals not in the labor force but who currently want a job remained unchanged at 6.4 million but has increased by 722,000 over the year.

Full-time work plummeted by 357,000. Conversely, the number of part-time workers employed spiked by almost 600,000. Additionally, the number of individuals working two or more jobs advanced by a staggering 443,000 to approximately 8.8 million.

‘Too Late’ Jerome Powell

This past spring, President Trump dubbed Federal Reserve Chair Jerome Powell “Too Late.” He warned that by not lowering interest rates early enough, Powell would threaten the US economy. Months later, Trump’s nickname for the central bank chief may have been proven correct. "Jerome 'Too Late' Powell should have lowered rates long ago. As usual, he’s 'Too Late!'" the president said in a Truth Social post.

The September Federal Open Market Committee (FOMC) policy meeting might be titled “It’s Never Too Late.” Before the August employment data, investors penciled in a 90% chance of a quarter-point interest rate cut. After the numbers were released, this number spiked to 100%, with some traders betting on a half-point reduction to the benchmark federal funds rate.

If the Fed follows through on a 50-basis-point super-sized rate cut, it would be a case of déjà vu. A year ago, the Eccles Building kicked off its easing cycle with a jumbo half-point cut. Will history repeat itself? If the US labor market is deteriorating at a fast-and-furious pace, as Fed Governor Christopher Waller has warned for months, the Fed might need to continue cutting in November and December out of necessity as well.

Got Stagflation?

While the latest bureau data was critical, the federal agency’s Consumer Price Index (CPI) for August will prove to be paramount for both the monetary authorities and the current administration. In recent months, tariff-driven price pressures have picked up at a modest pace, avoiding a sharp rise as many economic observers had predicted.

For now, the consensus estimate is calling for a headline annual inflation rate of 2.8%, from the previous month's 2.7%. Additionally, according to the Cleveland Fed Inflation Nowcasting model, the September print could eye 3%. If consumer price inflation continues to rise at an incremental level, the United States may be flirting with stagflation-lite. While growth prospects remain intact, slowing employment conditions and rising inflation could relive a milder 1970s period.