Hiring Drops in August as Labor Market Continues to Cool

Job gains came in well below expectations. June and May numbers were revised downward.

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Updated Sep 5, 2025 7:33 a.m. PDT · 8 min read

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Updated on Sept. 5.

What are the weekly jobless claims?

Initial jobless claims went up for the week ending Aug. 30, according to the report released on Sept. 4.

Why it matters: The weekly jobless claims, or initial claims, are the number of unemployment insurance claims filed in the past week. They provide an indicator of the strength — or weakness — of the labor market.

Learn more about this week's jobless claims

Jobless claims were 237,000 for the week ending Aug. 30, an increase of 8,000 from the previous week’s unrevised figure of 229,000.

» MORE: Laid off? Take these steps to get help

The new four-week moving average — a measurement of the number of people who filed for unemployment insurance for the first time over the last four weeks — was 231,000, up by 2,500 from the previous week's unrevised average of 228,500.

What's the insured unemployment rate?

Not all types of unemployment are included as part of the insured unemployment rate. It only includes "covered unemployment," as in people who receive unemployment benefits. Those who quit their jobs, for example, aren't included in the insured unemployment rate because they aren't eligible for unemployment benefits.

The advance seasonally adjusted insured unemployment rate — the rate of continuous covered unemployment claims divided by covered employment — remained at 1.3% for the week ending Aug. 23, when compared to the previous week’s unrevised rate.

The unemployment rate ticked up again to 4.3% in August, compared to 4.2% in July and 4.1% in June, according to the jobs report released on Sept. 5 by the Bureau of Labor Statistics (BLS).

Job gains came in well below expectations in August with a total of 22,000. The consensus forecast was an increase of 110,000, according to Morningstar, an investing firm.

Job gains in the previous two months were revised: From 14,000 down to -13,000 in June and from 73,000 up to 79,000 in July. When combining the two months, the revisions total 21,000 fewer jobs added during that time.

Employment rose in health care (+31,000) and social assistance (+16,000).

For the seventh month in a row, employment went down in the federal government (-15,000) due to mass federal workforce cuts made earlier this year by the so-called Department of Government Efficiency (DOGE). Employees on paid leave or receiving severance are considered employed, which means the full effect of the cuts are yet to show up in the report. Employment also went down in mining, quarrying and oil and gas extraction (-6,000).

Average hourly earnings of all private nonfarm employee payrolls rose by 3.7% in August over the past 12 months, compared to 3.9% 12-month increase reported in July 2025.

What the latest job market data means for you

The July jobs report shows that the labor market is continuing to cool, demonstrated by lower-than-expected job growth for August.

Wage growth (3.7%) remains above inflation growth (2.6%), which means consumers are more likely to remain resilient in the face of price increases — that is, unless there are price shocks. The effect of tariffs on prices haven’t fully set in so it’s unclear how that might impact inflation growth.

There are some vulnerabilities in the job market continuing to trend, including more workers remaining in long-term unemployment, which shows workers may be having more difficulty re-entering the job market. The labor force participation rate also remains sluggish.

Both the health care and social assistance sectors showed strong labor demand, while the number of federal government jobs continued to wane.

Overall, the latest data reflects growing caution among employers as the projected economic picture remains hazy.

What a NerdWallet expert says

Elizabeth Renter, economist at NerdWallet, says of the August jobs report, released on Sept. 5:

The labor market has undoubtedly cooled and unemployment rates are rising among some groups that are often the first hit before trouble spreads. We’re also seeing the shrinking federal workforce, as those who left or were forced out over the past several months are running out of leave and severance. And the diffusion index tells us there are more industries losing jobs than gaining them.

The paltry number of jobs added last month deserves some context. The breakeven rate — where the number of jobs added each month supports a healthy labor market — moves based on how the labor force grows (or doesn’t). And labor force growth depends pretty significantly on immigration. If the labor supply is constrained by immigration policies, for instance, the number of jobs added can slow significantly without an uptick in unemployment.

This obviously doesn’t mean today’s jobs report is good; June’s figures were revised to a negative. But as policies that affect the economy change, so does the data — both the headline figures and their interpretations. <br>Here’s what Renter had to say about the findings of the latest Job Openings and Labor Turnover Summary (JOLTS) report, released on Sept. 3:

Little changed in employer behavior from June to July — the rates of job openings, hiring, quits and layoffs remain fairly consistent and subdued.

Workers in the job market no doubt know this to be true, as hiring has been gradually slowing since the job-hopping spree of 2022. Now, finding jobs to apply to is more difficult and getting hired likely seems an insurmountable task.

Employers have been tightening their purse strings to cope with uncertainty in the economic outlook. This means holding back on hiring they might otherwise do. Fortunately, thus far, it’s also meant holding back on layoffs.

Not only are policies up in the air, so are their impacts. Changes to trade and immigration policies stand to have major effects on the labor market, and so long as they remain tied up in court or otherwise in-flux, making business decisions about the near- and long-term future will remain difficult.

What you can do next

Learn more about how the economy is doing
Explore ways to track monthly expenses
Find out what to do next if you’re laid off
Make a plan for your finances before a recession hits

What is the current unemployment rate?

The current unemployment rate is 4.3% for August, a 0.1 percentage point increase from July (4.2%). The rate is higher than unemployment rates during 2023 and 2024.

The unemployment rate has risen since hitting a 50-year low of 3.4% in April 2023. Since May 2024, the unemployment rate has stayed between 4% and 4.2%.

How the unemployment rate is calculated

The unemployment rate is calculated by dividing the number of unemployed people by the number of people in the labor force. (The labor force is considered the sum of those who are currently working or looking for work.) The result is then multiplied by 100 to get a percentage:

Number of unemployed people / Labor force x 100 = X%, which is the unemployment rate

Will unemployment go up soon?

The labor market has been showing signs of weakening in recent months.

The recent rise in unemployment was a byproduct of monetary policymakers’ effort to curb inflation by hiking interest rates. The Federal Reserve raised the federal funds rate 11 times between March 2022 and July 2023. Now that inflation is consistently slowing, the Fed has taken steps to prevent unemployment from rising further.

The Fed cut rates in 2024 at its September, November and December meetings. It paused rates at every meeting so far in 2025, but has indicated that there could be some rate cuts in 2025.

» MORE: What is the minimum wage?

Are wages increasing?

Wage growth is moderating from what it was a year ago but is still higher than it was pre-pandemic, according to data from the Federal Reserve Bank of Atlanta. The three-month moving average of median hourly wage growth — when measured over the previous 12 months — has slowed from its peak in the summer of 2022.

For June, the three-month wage growth percent change was 4.2%, which is in line with the three-month moving average rate since November 2024.

The 12-month moving average for all workers — part-time and full-time — was 4.3% in June, a 0.1 percentage point decline from May. By comparison, the percent change for June 2024 from a year prior was 5.1%. If you look back even further, at the percent change for June 2020 from a year prior, the rate was 3.6%.

» MORE: What is the minimum wage?

Below, the Federal Reserve Bank of Atlanta data for June shows a steady three-month moving average of wage growth compared to peak rates in June 2022 and July 2022.

What does the Employment Cost Index show?

Increases in compensation costs in the second quarter of 2025 were the same as the first quarter, according to the most recent quarterly BLS Employment Cost Index, which measures wage and salary growth. Wages and salaries, as well as benefits comprise total compensation costs.

The July 31 report shows compensation costs increased by 0.9% in the second quarter of 2025, matching the increase in the first quarter.

Year-over-year measurements show that compensation cost increases held steady in Q2 2025 (3.6%), matching the pace of the first quarter, but still slower than the rates seen throughout 2024.

Q1 2025: 3.6%
Q4 2024: 3.8%
Q3 2024: 3.9%
Q2 2024: 4.0%
Q1 2024: 4.2%

For the 12-month period ending in June 2025, wages and salaries increased 3.6%, a decrease from 4.2% in the 12-month period ending in June 2024.

Benefit costs had a lower increase in the 12-month period ending in June (3.5%) compared to June 2024 (3.8%).

» MORE: What is the median household income?

More key jobs data and what it means

How many jobs were added in August?

The economy added 22,000 in August, according to the BLS, well below expected gains. Here’s how many jobs were added in previous months.

79,000 in July 2025.
-13,000 in June 2025.
19,000 in May 2025.
158,000 in April 2025.
120,000 in March 2025
102,000 in February 2025.
111,000 in January 2025.
323,000 in December 2024.
261,000 in November 2024
159,068 in October 2024
159,025 in September 2024
158,770 in August 2024
144,000 in July 2024

What is the labor force participation rate?

The labor force participation rate went up slightly at 62.3% in August, compared to 62.2% in July, according to the Bureau of Labor Statistics.

Why it matters: The labor force participation rate is the percentage of the population that is working or looking for work.

The rate is calculated as the labor force divided by the total population that’s eligible to work. (The Bureau of Labor Statistics defines the total population that’s eligible to work as the “civilian noninstitutional population,” which refers to people ages 16 and older who are not in military service or incarcerated.) The result is multiplied by 100 to get a percentage:

Labor force / Civilian noninstitutional population x 100 = X%, which is the labor force participation rate

Since October 2002, the labor force participation rate was lowest in April 2020 (60.1%) and highest in June 2003 (66.5%), according to BLS data.

How many job openings were there in July?

The latest Job Openings and Labor Turnover Summary (JOLTS), released on Sept. 3, shows job openings were 7.2 million in July. The number of openings in July is roughly 300,000 lower than last year at the same time.

7.4 million in June
7.7 million in May
7.4 million in April
7.2 million in March
7.5 million in February
7.8 million January
7.5 million in December
8 million in November
7.6 million in October
7.1 million in September
7.7 million in August 2024
7.5 million in July 2024

The seasonally adjusted job openings went down slightly to 4.3% in July from 4.4% in June. By comparison, the job openings rate in July 2024 was 4.5%.

The number of job openings went down in health care and social assistance (-181,000); arts, entertainment, and recreation (-62,000); and mining and logging (-13,000).

What is the layoff rate?

The rate of layoffs in July (1.1%) ticked up 0.1 percentage point from June (1%), according to the most recent JOLTS report. Layoffs and discharges went down in professional and business services (-130,000), but rose in the federal government (+5,000).

What is the quit rate?

The JOLTS report also shows the quit rate in July was 2%, mirroring the rate in June. The current rate is 0.1 percentage point lower than the quit rate in July 2024. Quits went down in construction (-80,000) and in transportation, warehousing, and utilities (-49,000). Quits in professional and business services rose (+197,000).

Why it matters: Economists say quit rates are a key factor in the health of employment prospects since quitting shows that workers feel safe making a job switch within their sector or outside it entirely.

The current quit rate is consistent with pre-pandemic levels after peaking at 3% in both Nov. 2021 and April 2022.

When is the next jobs report?

The next jobs report will show data for September and it will be released on Oct. 3.

(Photo by Spencer Platt/Getty Images News via Getty Images)

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