U.S. Job Growth Stalls in August, Unemployment Rises: Fed Warms Up for Rate Cuts

Labor force participation edged up to 62% from 62.2%, while wages rose 0.3% month-on-month and 3.7% year-on-year, in line with projections.

Written by: Ignacio Teson • Friday, September 5, 2025 • 1 min read

• Last updated: Friday, September 5, 2025

Quick overview

U.S. job creation in August was significantly lower than expected, with only 22,000 jobs added compared to forecasts of 75,000.
The unemployment rate rose to 4.3%, while the underemployment rate increased to 8.1%, indicating labor market weakness.
Job creation has slowed dramatically, with only 833,000 jobs added this year, a 48% decrease year-over-year.
The weak job report strengthens the case for a potential 25-basis-point rate cut by the Federal Reserve at their upcoming meeting.

U.S. job creation came in well below expectations in August, reinforcing views that the Federal Reserve will shift its focus from fighting inflation to supporting growth.

Official data showed that employers added just 22,000 jobs, compared with forecasts of 75,000, marking the second-weakest figure so far this year.

July payrolls were revised slightly upward to 79,000 from an initial 73,000. The unemployment rate ticked up to 4.3% from 4.2%, as expected, but what stood out was the rise in the underemployment rate, which climbed to 8.1% from 7.9%, often seen as a leading indicator of labor market weakness.

The data highlight the sharp cooling of the U.S. job market. Through August, only 833,000 jobs have been created, down 48% year-over-year. The slowdown has intensified in recent months, with just 114,000 jobs added in the past three months, a 73% drop from the same period in 2024.

Labor force participation edged up to 62.3% from 62.2%, while wages rose 0.3% month-on-month and 3.7% year-on-year, broadly in line with projections.

For markets, the message is clear: the Fed has room to cut. Another weak report strengthens the case for a 25-basis-point rate reduction at the September 17 meeting. According to CME Group’s FedWatch tool, traders are pricing in a 98% probability of such a move. Inflation data for August, due next week, could provide the final confirmation, but today’s report has likely tipped the balance.

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ABOUT THE AUTHOR See More

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.