Fellas…are we cooked?
The Bureau of Labor Statistics’ August jobs report was, well, not good. Employers made few job gains, while the unemployment rate rose to its highest level in years. As the labor market slowed further this summer, experts have again sounded the alarm about an economic downturn. Let’s take a closer look.
Diving into the data. Employers added just 22,000 jobs in August, well below economists’ expectations of 75,000. Meanwhile, June job gains were revised down by 13,000, and July job gains were revised up to 79,000. The unemployment rate increased to 4.3%, the highest seen since October 2021.
Friday’s dismal data ignited fears that a recession may be imminent, while Mark Zandi, an economist at Moody’s, speculated that the labor market is already in one, and has been since June, Business Insider reported. While one month of data is not enough evidence of a recession, the unemployment rate rising while job gains are slowing is a concerning early sign, said Glassdoor’s chief economist, Daniel Zhao, noting if this trend continues in the coming months, it could trigger the Sahm rule (a recession indicator).
“A more substantial downturn is definitely something that businesses have to plan for,” Zhao said. “It’s not a guarantee, but especially with the increasing unemployment rate there are more signs that the job market is weakening in an unhealthy manner.”
Amy Glaser, SVP of business operations at staffing firm Adecco, cautioned employers against letting the topline August numbers drive their talent decision-making.
“We’ll have to wait and see what comes out in September. At this point, I’m still optimistic the labor market is going to remain resilient and strong,” she said. “We’ve called 2025 the year of durability in terms of the labor market. Unemployment changed very minimally, so there’s still opportunity out there for millions of Americans on a daily basis.”
Healthcare added around 31,000 jobs in August, the largest increase of any industry but also below the average monthly gains of 42,000 that the sector reported over the last year. The healthcare industry has made up the bulk of the labor market’s job gains in recent years, and now a moderation in healthcare hiring may not adequately make up for cooling in other sectors.
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“There’s no guarantee that healthcare will continue to add jobs at the pace that we’ve seen in recent years. So even if healthcare is continuing to add jobs in the short to medium term, it might not be enough to outweigh the declines in jobs that we’re seeing across all other industries,” Zhao said.
Healthcare was followed by social assistance, which added more than 16,000 jobs, and accommodation and food services, which added over 13,000 jobs. Additionally, retail trade added 10,000 jobs, mostly driven by general merchandising.
Meanwhile, professional and business services reported a decline, with 17,000 fewer jobs added—the steepest of any industry. That sector was followed by durable goods manufacturing and the federal government, which added 19,000 and 15,000 fewer jobs, respectively.
Zoom out. Unfortunately for employers, it’s uncertain how the economy will play out over the next few months. The Federal Reserve is expected to meet and cut interest rates later this month. Lower interest rates could free up cash for businesses and allow them to pursue business investments that lead to hiring.
“Overall, I would say that rate cuts will be stimulative, but it’s not a guarantee that it will outweigh some of these other factors that aren’t related to rates at all,” Zhao said.
The other primary factor at play is tariffs. Despite being locked up in court challenges, many of President Donald Trump’s tariffs policies went into effect in August, charging a 10% to 50% tax on imported goods, depending on the origin country. The impact of tariffs on consumers and businesses isn’t yet known, though sectors like retail and leisure and hospitality—both of which reported employment gains in August—will likely be negatively affected, according to Zhao.
In light of this uncertainty, Glaser said employers are focused on making multiple contingency plans.
“I think if Covid taught us anything as employers, it taught us the ability to be agile and to move quickly,” she said. “So employers are trying to get ahead of it, as we speak today.”