After months of warning signs, the slowdown in America's labor market is now undeniable.

August's jobs report reveals a near standstill in hiring, cementing expectations that the Federal Reserve will be forced to cut interest rates—and perhaps more aggressively than markets had already anticipated.

August Jobs Data Is So Bad, The Fed Can't Hide From Rate Cuts Anymore

The U.S. economy added just 22,000 jobs in August, down sharply from July's 79,000 and far short of the 75,000 economists had expected.

Revisions added to the gloom: June payrolls were cut by 27,000 to show a loss of 13,000 jobs, while July was revised up by 6,000 to 79,000. Taken together, employment for June and July is now 21,000 lower than previously reported.

In August, health care added 31,000 jobs, undershooting the 12-month average gain of 42,000. Hiring continued across ambulatory health care services (up 13,000), nursing and residential care facilities (up 9,000), and hospitals (up 9,000).

Social assistance also trended higher, adding 16,000 jobs, entirely driven by growth in individual and family services.

Private payroll growth slowed to 38,000 from 77,000, while government payrolls contracted by 16,000 after a modest 2,000 gain the prior month.

The unemployment rate edged up to 4.3% from 4.2%, in line with forecasts. Wage growth remained steady: average hourly earnings rose 0.3% on the month and 3.7% year-over-year, cooling from July's 3.9%.

Wall Street Gains As Investors Cheer Rate Cuts

Markets are now fully pricing in a 25-basis-point Fed rate cut at the Sept. 17 meeting. The weak August data also pushed odds of another cut in October to 65%, up from 53% a day earlier.

Wall Street cheered the prospect of easier policy. Futures on the Nasdaq 100 climbed 0.6% in premarket trading, while the S&P 500 gained 0.4%.

On Thursday the S&P 500 – as tracked by the Vanguard S&P 500 ETF – closed at record highs.

Treasuries rallied, with 2-year yields down 9 basis points to 3.50% and 30-year yields lower by 4 basis points to 4.80%.

Gold also advanced, with futures up 0.8% to $3,575 per ounce, putting the precious metal on track for a new record high.

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Image created using artificial intelligence via Midjourney.