On the US Jobs Market’s Summer Slowdown

US job growth slowed again in August, and many think a Fed rate cut next week is now all but assured. We won’t go that far, as central bankers’ actions defy prediction. But August’s jobs numbers do appear to provide further evidence of the negative economic fallout tied to tariffs and the associated uncertainty this past spring. This isn’t new information to forward-looking stocks, but understanding why the data are weak can help investors see how economic reality aligns with expectations—crucial to success in investing.

August nonfarm payrolls rose by 22,000, slowing sharply from July’s 79,000 and well short of expectations of 76,500, while the unemployment rate (4.3% from July’s 4.2%) matched forecasts.^[i] Notable revisions to July and June’s results grabbed some attention. While the Bureau of Labor Statistics (BLS) revised July nonfarm payrolls’ gain upward (from 73,000 to 79,000), June’s figures flipped to contraction (from 14,000 to -13,000)—the first negative month since December 2020.^[ii] That June slip, combined with weak August results, prompted plenty of dour commentary. Many analysts think the tepid showing means the Fed will lower rates by at least a quarter point later this month—and some speculate whether a half-point cut is on the table.

Call a spade a spade: August’s jobs numbers weren’t great. They add to a lackluster streak that appears to have extended to last year. Per its annual review released today, the BLS revised nonfarm employment down by -911,000 in the period from March 2024 – March 2025 as the agency updated its survey-based results with more comprehensive figures from state unemployment office records.^[iii] This annual benchmark revision is a standard practice, and this was only the preliminary version. It will be revised again early next year and could swing back up, as happened with the final benchmark revision for 2023 – 2024.

Still, this labor market weakness is well known, which is what matters most for stocks. Looking under the hood for August, federal government payrolls (-15,000) were among the largest detractors and have been declining most of the year (down -97,000 since January).^[iv] We feel for those affected by these or any layoffs, but the sector’s ongoing job losses aren’t surprising—nor are they necessarily hugely consequential to stocks, which chiefly reflect private-sector activity.

Looking ahead, economists are already penciling in further federal job losses. Many workers who took paid leave or received severance pay (around 150,000, per JPMorgan Chase economists) are set to start coming off government payrolls starting in October.^[v] Beyond government employment, manufacturing payrolls (-12,000 in August) have contracted since May, continually defying talk of a tariff-induced production boost. Positively, health care payrolls have steadily risen—up in 11 of the past 12 months and climbing by 31,000 in August.^[vi]

As for June’s downward revision, nothing nefarious is afoot here—which we say to those concerned data were politicized under prior leadership as well as those who fear they will become so. As the BLS noted, “Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.”^[vii] The added survey responses received deliver a more comprehensive and precise estimate. Interestingly, June’s revised BLS figure looks in line with payroll processor ADP’s nonfarm private payrolls jobs report. (Exhibit 1)

Exhibit 1: ADP and BLS (Initial and Revised) Private Nonfarm Payroll Growth

Source: FactSet and St. Louis Federal Reserve, as of 9/5/2025.

ADP likely got to the more accurate reading quickly because of data inputs, as it uses its own payroll records to produce a snapshot of monthly changes. This isn’t complete because ADP isn’t the only payroll processor in town, but it is a simple data collection method. The BLS, in contrast, relies on surveys, which have suffered from low initial response rates.

For investors, August’s report is a reminder no one dataset is the end-all, be-all. Yes, the BLS understandably receives a lot of attention and eyeballs (recent political brouhahas notwithstanding). The agency produces numerous datasets that provide insight into labor markets and prices nationwide. But the BLS doesn’t have a monopoly on that information—as the ADP payroll numbers prove. Moreover, jobs are late-lagging data and subject to change. Go back to June’s revision, which extended the downgrade from the initially reported sizable gain to the minor gain revealed in last month’s revision—and now to a minor loss.

The updated number echoes other weak economic data from earlier in the year. As we detailed in July when Q2 GDP came out, a few underlying components indicated output wasn’t as rosy as the headline number suggested. Tariff-related uncertainty likely caused business investment to slow (from 10.3% annualized to 5.7%), as equipment spending decelerated and a contraction in structures investment accelerated.^[viii] At the time, the Trump administration had paused reciprocal tariffs, and it was uncertain whether they would return—and if they did, whether they would be higher or lower. If you are a company, wouldn’t it make sense to hold off on pricey investments—including hiring—until you got some more clarity? Those unknowns likely contributed to tepid jobs growth this year.

For forward-looking stocks, though, nothing from August’s report is new. Ever since President Donald Trump won last year’s election, tariffs have been in headlines. Their eventual scale and scope may have been a shock. But stocks have digested the oodles and oodles of opinions and outlooks regarding tariffs’ economic implications since the Liberation Day announcement over five months ago. It is hard to see levies carrying much surprise power at this point.

To be clear, we think tariffs remain an economic negative. They make doing business more difficult and mean higher prices for companies and households. We say this as a statement provable time and again with economic data, not a political statement. But “negative for shoppers” doesn’t equate to “negative for markets.” What matters most for stocks is whether private companies remain profitable for the foreseeable future. Tariffs, while a nuisance, so far aren’t big enough to derail corporate earnings beyond what people expect. Stocks have pre-priced their effects—and have likely long since moved on.