U.S. Jobs Report Misses Forecast: Weak Nonfarm Payrolls Signal Labor Market Cooling

Payroll Disappointment Raises Concern Over Labor Market Momentum

The U.S. labor market showed further signs of slowing in August, with nonfarm payrolls increasing by just 22,000—well below the Dow Jones forecast of 75,000. The unemployment rate ticked higher to 4.3%, up from 4.2% in July, reinforcing expectations that the Federal Reserve may maintain its current stance for longer amid persistent economic fragility.

Health Care and Services Add Jobs, But Losses Mount in Federal and Industrial Sectors

While health care led job creation with 31,000 new positions, this was below the prior 12-month average of 42,000. Social assistance added 16,000 jobs, mainly in family services. However, these gains were offset by notable losses elsewhere: federal government employment dropped by 15,000, continuing a steady decline since January, and the mining, quarrying, and oil and gas sector lost 6,000 jobs.

Manufacturing employment declined by 12,000, with transportation equipment shedding 15,000 jobs, largely attributed to strike activity. Wholesale trade fell by 12,000, deepening its three-month decline to 32,000. Retail trade offered a modest positive surprise, adding 10,500 jobs after previous weakness.

Wage Growth Steady, but Participation Stagnant

Average hourly earnings rose 0.3% month-over-month, in line with expectations, reaching $36.53. On a yearly basis, wages grew 3.7%. The average workweek held steady at 34.2 hours. However, labor force participation remained at 62.3%, unchanged from July and 0.4 percentage points lower year-over-year. The employment-population ratio was flat at 59.6%.

Long-term unemployment edged up to 1.93 million, now comprising over 25% of total unemployed. New entrants to the labor force fell sharply by 199,000, reversing gains from the previous month—a potential sign of waning confidence among job seekers.

Mixed Sector Performance Limits Job Market Upside

Employment gains were limited across key sectors. Construction lost 7,000 jobs, professional and business services dropped 17,000, and financial activities contracted by 3,000. Meanwhile, leisure and hospitality added 28,000 jobs, partially offsetting broader weakness. Transportation and warehousing posted a smaller gain of 3,600.

Market Outlook: Labor Weakness Tilts Bias Bearish for USD, Supports Dovish Fed Stance

The weak headline payroll figure, uptick in unemployment, and stagnant participation suggest a cooling labor market that could weigh on U.S. consumer demand. These developments are likely to bolster expectations that the Federal Reserve will maintain a cautious approach, potentially delaying further tightening. With fewer inflationary wage pressures and soft job creation, near-term sentiment for the U.S. dollar turns mildly bearish. Interest rate-sensitive assets, such as Treasuries and tech equities, may see renewed support from traders anticipating a more dovish Fed outlook.