Job Growth Stalls, Strengthening the Fed’s Case for Rate Cuts
For the first time since April 2021, jobless numbers have surpassed job openings. The Fed, once reluctant, is now forced to act.
Quick overview
- For the first time since April 2021, the number of unemployed Americans exceeds job openings.
- The U.S. economy added only 22,000 jobs in August, significantly below expectations and the monthly average for 2024.
- Fed futures are pricing in a potential quarter-point rate cut at the upcoming meeting, though a half-point cut is considered unlikely.
- The unemployment rate rose to 4.3% in August, with a broader measure indicating an increase in underemployment.
For the first time since April 2021, the number of unemployed Americans now exceeds job openings. Chicago futures are already pricing in a quarter-point (25 basis points) rate cut at the September 17 meeting. Could it stretch to half a point? The Fed faces three challenges.
The U.S. economy added just 22,000 net jobs in August, far below the 75,000 expected—and even further from the 168,000 monthly average seen in 2024. President Trump achieved what once seemed impossible: he managed to crack and halt a formidable job-creation engine, the same one that had withstood the 2022–2023 rate hikes (550 basis points from zero) without faltering. Its resilience spared the economy from the recession nearly all forecasts predicted. Instead, Trump 2.0 has done the damage—through tariff hikes and mass deportations.
Job Numbers Stall
Chicago futures already take for granted a quarter-point cut at the September 17 meeting. Could it stretch to half a point? Unlikely—odds are just 8%. Last September, Fed Chair Jerome Powell didn’t hesitate. This Tuesday, however, the annual employment benchmark revision—covering April 2024 to March 2025—would have to slash more than half a million jobs to convince him to repeat that surprise move.
The labor market has hit a sudden wall. August’s report showed 22,000 new jobs, but 21,000 from June and July were revised away. June itself saw a decline of 13,000—the first monthly drop since the pandemic in 2020. Strip out a single sector—healthcare, which for the second straight month accounted for more than 120% of total hiring—and the private sector remains in net contraction.
Jerome Powell’s “Curious Balance”
At Jackson Hole, Powell spoke of a “curious balance” where labor supply and demand both decline in tandem, preserving the unemployment rate. But in August, the rate climbed again—to 4.3%, two-tenths higher than June. Labor demand hasn’t fallen; it has grown. Moreover, the number of people outside the labor force but still wanting a job rose by 179,000. If counted, the unemployment rate would have jumped from 7.6% to 7.8%. A broader measure—the U-6 underemployment rate, which includes involuntary part-time workers—rose from 7.9% to 8.1%.
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