NEW YORK, Sept 5 (Reuters) - The pace of U.S. job growth slowed more than expected in August, and the unemployment rate increased, pointing to signs of slowing labor market conditions and boosting expectations the Federal Reserve will need to be more aggressive in cutting interest rates.

Nonfarm payrolls increased by 22,000 jobs in August, after rising by an upwardly revised 79,000 in June, the Labor Department data showed on Friday. Economists polled by Reuters had forecast 75,000 jobs added last month.

Sign up here.

The unemployment rate rose to 4.3% in August from 4.2% in the previous month.

MARKET REACTION

STOCKS: S&P E-minis moved higher and were last up 0.45%

BONDS: Treasury yields tumbled, with the yield on the benchmark U.S. 10-year note down 10.6 basis points to 4.069% and the two-year note yield down 12 basis points to 3.472%

FOREX: The dollar index weakened further and was last down 0.64% to 97.61

COMMENTS:

BILL MERZ, HEAD OF CAPITAL MARKETS RESEARCH AND PORTFOLIO CONSTRUCTION, U.S. BANK ASSET MANAGEMENT GROUP, MINNEAPOLIS:

"This morning's soft payroll report is being interpreted by investors as an example of bad news is good news, and that's really because the payroll report today confirms a softening labor market and justifies a rate cut at the Fed meeting later this month.... It's a slower labor market, a slower job turnover market. We still continue to see consumers spending at around a 5% year-over-year clip, so the consumer continues to hang in there.”

MELISSA BROWN, MANAGING DIRECTOR OF INVESTMENT DECISION RESEARCH, SIMCORP, NEW YORK:

“With employment gains coming in lower than expected and downward revisions of prior months’ figures, it is clear that the economy is slowing. The lower job numbers, affecting most industries, are not surprising, as companies continue to face uncertainty surrounding tariffs and are putting off hiring.

“The likelihood of more than one Fed rate cut has increased, but the specter of stagflation remains, as inflation is still a major concern and is not being tamed by the slower economic growth. If tariffs were finalized one could make the case that there would be just a one-time increase in prices, but as they continue to be on-again, off-again there Is a rolling impact that keeps inflation up.”

KIM FORREST, CHIEF INVESTMENT OFFICER, BOKEH CAPITAL PARTNERS, PITTSBURGH:

"The weak numbers that were just reported are giving the Fed ample room for cutting rates. There are some disturbing trends in this: the lack of jobs, the miss on the headline, and also the increase in the U-6 underemployment is also troubling.

"It looks like we may have the 50-basis point cut coming up and it also looks like in the next three meetings, we (the Fed) may have to cut rates to support the economy."

JEFFREY LESCHEN, MANAGING DIRECTOR, BRAMSHILL INVESTMENTS, NAPLES, FLORIDA:

“We were not surprised to see the number. There’s a bit of uncertainty because of tariffs and AI, which could put pressure on hiring plans. There’s a lot of things in the future to be positive about, such as investments into the U.S. which could lead to manufacturing jobs. But it’s going to take a while to filter through.

“The data puts a 50 bps cut back on the table. Today’s jobs report definitely solidifies the case for three rate cuts this year.”

ART HOGAN, CHIEF MARKET STRATEGIST, B RILEY WEALTH, NY:

"So the jobs number, while confusing with what we know about the total workforce population growth, continues to disappoint to the downside.

"When you add everything up, you've got an average monthly jobs creation number that sits at or about 30,000. That's down from 135,000 the three months before this. So things are obviously slowing in the labor market. More importantly to the Fed is the unemployment rate moved up to 4.3%, which is a new high and I certainly think that that's one thing they'll focus on.

"So this clearly leaves the door wide open for the Fed to cut rates in September to remain data dependent, especially as it pertains to the labor market in October and December meetings, but I certainly think that a rate cut in September is locked and loaded with today's data, barring any major upside surprise to the CPI inflation data that comes out next week."

ED MAGUIRE, SENIOR DIRECTOR OF RESEARCH, FREEDOM CAPITAL MARKETS, NEW YORK:

“Today's report evidences further softening in the jobs market. Despite uncertainties relating to the impact of tariffs and AI-powered automation remaining an overhang on hiring, the impact of recent tax law changes encouraging investment does appear to bolster underlying resilience in the U.S. economy. We appear in Goldilocks territory, with enough underlying strength to offset tepid jobs data.”

Phil Blancato, CHIEF EXECUTIVE OFFICER, LADENBURG THALMANN ASSET MANAGEMENT, NEW YORK:

"This certainly gives the Fed room to cut 25 basis points in September. I don't think it's 50. August hour tends to get revised back higher. They know that August is a noisy month because of back to school and the summer employment."

"When you look at average hourly earnings, which are coming down, you look at the participation which are coming down... by and large when you look at these numbers, it would suggest the Fed should be cutting."

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN:

"A 50 basis point cut is back on the table. Everyone was probably more keyed-in on the revisions than the headline number. With revisions, there was nearly net zero job creation. Aggregate weekly hours were unchanged in August with broad declines across industries. Anything trade or tariff related saw declines in aggregate weekly hours worked. The diffusion index for private sector employment has been below 50, so it’s a top-heavy economy. You need some better breadth to remove the economic anxiety out there.

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK:

"It shows that the labor market is stalling to the point where we could experience negative job growth in the months ahead and this is all due to uncertainties as hiring is basically frozen due to the uncertainties over tariffs. So this raises perhaps speculation that the Fed may, even though I'm skeptical about this, but it does raise speculation that the Fed could cut by 50 basis points in September.

"In terms of the economy, there's no question we're weakening and then that's because of the uncertainties over the tariffs. Consumers are still spending, but if it becomes harder to find a job all of a sudden and we find ourselves losing jobs, that certainly would mean weaker economic activity."

DAVID REES, HEAD OF GLOBAL ECONOMICS, SCHRODERS, UNITED KINGDOM (via email):

"The continued slump in US employment growth in August clears the way for the Fed to cut rates later this month.

"But while the odds are now stacked firmly in favour of imminent rate cuts, the Fed will need to tread carefully. After all, most other labour market measures have held up well and changes to immigration policy are likely to restrict the supply of workers in the future. With the broader economy seemingly rebounding now the most pressing policy uncertainties have passed, it may not be long until hiring picks up again.

"More generally, the strong performance of the US economy in recent years means that twin monetary and fiscal stimulus are more likely to fuel a pick-up in inflation than real GDP growth next year – and that is before the inflationary impact of tariffs is considered. Even though the Fed is highly likely to cut rates this month, market pricing for the fed funds rate to fall all the way to 3% next year still seems optimistic."

https://www.reuters.com/business/instant-view-us-job-growth-slows-sharply-august-unemployment-rate-ticks-higher-2025-09-05/