Closely watched, US employment figures have confirmed the ongoing slowdown in the labor market and, more broadly, in the US economy. The August report was significantly weaker than anticipated, with only 22,000 net non-farm job creations, compared to the consensus expectation of 75,000. Figures for the previous two months were also revised downward by 21,000, bringing the three-month rolling average to less than 30,000. This level falls below the "equilibrium rate" of employment, i.e., the number of job creations needed to stabilize unemployment. In detail, the weakening is particularly marked in the manufacturing sectors, which have been made a priority by Donald Trump in his drive to reindustrialize the country, as well as in the administration (where job cuts are a direct consequence of budget cuts). Only a few sectors, notably healthcare, are keeping their heads above water. The household survey partially confirms this nervousness, with an unemployment rate rising slightly to 4.3% (+0.1%). Although still relatively low, this level represents the highest level since October 2021. Moreover, this figure is being kept artificially low due to migrant deportations, which are reducing the number of job seekers.
Despite the US President's repeated attacks on the reliability of Bureau of Labor Statistics (BLS) statistics, all other surveys converge on the same observation: employment momentum is slowing. Upon his arrival in the White House, Donald Trump warned of "a short period of adjustment." Here we are. The question now is how long it will last. Although the labor market is not in a state of collapse, warning signs are multiplying. After the post-pandemic excesses, we have returned to a fragile equilibrium point between supply and demand where everything seems frozen. Companies are no longer hiring, deprived of visibility by customs duties. On the employee side, momentum has also stalled. The salary premium linked to resignations has returned to negative territory, a sign that a job change no longer offers a raise, which limits turnover.
After Jerome Powell's dovish remarks at Jackson Hole, this publication seals the Fed's key rate cut next week, regardless of the numerous inflation figures expected this week (PPI, CPI, and University of Michigan expectations), which will confirm that the 2% target is now wishful thinking. For now, financial markets are not yet overly concerned about these negative indicators. With the Fed Funds rate still above 4.25% and more than 100 basis points of cuts anticipated by the first quarter of 2026, investors believe the Fed has the necessary room to maneuver to steer a soft landing for the US economy. But by getting too close to breaking point, be careful not to cross the line.
