Private Sector Adds 54,000 Jobs in August
Falls Short of Expectations, Half of July’s Total
Rate Cut Hopes Rise... 44% Chance of Three Cuts This Year
Private sector employment in the United States saw an unexpectedly sharp decline last month. As recent signs of a cooling labor market continue to emerge, a September rate cut is increasingly seen as a given, and attention is now turning to the extent of rate cuts expected within the year.
On September 4 (local time), U.S. private labor market research firm ADP released its employment report, showing that the number of new jobs in the private sector increased by only 54,000 in August. This figure falls short of the Dow Jones forecast of 75,000 and is also about half the previous month's total of 106,000.
By industry, employment in the trade, transportation, and utilities sector decreased by 17,000 jobs. Education and health services dropped by 12,000, manufacturing by 7,000, and finance by 2,000. In contrast, leisure and hospitality saw an increase of 50,000 jobs, professional and business services grew by 15,000, and construction rose by 16,000.
The wage growth rate remained the same as the previous month. For workers who have been at their current job for more than a year, wages rose by 4.4% year-on-year, while job changers saw their wages increase by 7.1%.
Nela Richardson, Chief Economist at ADP, commented, "This year started with strong job growth, but as uncertainty has increased, momentum is wavering." She identified labor shortages, consumer anxiety, and disruption caused by artificial intelligence (AI) as independent factors behind the slowdown in employment.
Wall Street is closely watching the impact of President Donald Trump's aggressive tariff policies on employment, prices, and the broader U.S. economy. Meanwhile, signs of a slowdown in job growth are steadily accumulating.
As signals of a labor market slowdown continue to appear, market expectations for a rate cut have grown even stronger. According to the CME FedWatch Tool at the Chicago Mercantile Exchange, the federal funds futures market on this day reflected a 97.6% probability that the U.S. Federal Reserve will cut its current 4.25-4.5% rate by 0.25 percentage points in September. This is up from 86.7% a week ago. The probability that the Fed will cut rates at all three remaining meetings this year, for a total reduction of 0.75 percentage points, also rose to 44%, up from 37% a week earlier.
A more accurate indicator of labor market trends will come with the U.S. Department of Labor’s August employment report, scheduled for release on September 5. The market expects nonfarm payrolls to increase by only 75,000, a slight rise from July’s 73,000. If so, this would mark a fourth consecutive month of job growth below 100,000, the weakest stretch since the height of the COVID-19 pandemic in 2020. The unemployment rate is expected to edge up from 4.2% in July to 4.3% in August.
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