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 on Sept. 30.
What are the weekly jobless claims?
Initial jobless claims fell for the week ending Sept. 20, according to the report released on Sept. 25.
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 218,000 for the week ending Sept. 20, a decrease of 14,000 from the previous week's revised level of 232,000.
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 237,500, down by 2,750 from the previous week's revised average of 240,250.
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 Sept. 13, 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.
» Stay informed: Check out our news hub for all the latest.
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.
Here’s what Renter had to say about the findings of the latest Job Openings and Labor Turnover Summary (JOLTS) report, released on Sept. 30:
Employers seem to be in a holding pattern, with relatively few hires and layoffs overall, and not much changing from month to month. This stability from one month to the next suggests the labor market may not be actively cooling and instead has cooled to a stable point. Unfortunately for workers, this kind of stable isn’t great. If you’re hoping to find a better job or if you’re currently out of work and job searching, the opportunities are few and far between.
Factors that stand to impact the entire economy are still changing from day to day, with new tariffs announced this week and last, and the potential for a government shut-down before the sun rises tomorrow. Employers are understandably cautious about bringing on new talent or letting go of what they have.
The highest rate of job openings has been among the smallest businesses for the last few months. These are businesses you might not find on LinkedIn or Indeed, and instead are those within your community. Job seekers have to cast a wide net in the current environment, and should be cautious to not miss local opportunities or those you only find out about by word of mouth.
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
More stories like this? Yes, please!
Find exclusive content, rich storytelling, first-person accounts, trending news and original reporting in the NerdWallet app.
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 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 August?
The latest Job Openings and Labor Turnover Summary (JOLTS), released on Sept. 30, shows job openings were 7.2 million in August, unchanged from July. The number of openings in August is roughly 500,000 lower than last year at the same time.
- 7.2 million in July
- 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 rate was also unchanged from August at 4.3%. By comparison, the job openings rate in August 2024 was 4.6%.
The number of job openings went down in construction (-115,000) and in federal government (-61,000).
What is the layoff rate?
The rate of layoffs in August remained unchanged from July at 1.1%, according to the most recent JOLTS report. Layoffs and discharges went down in wholesale trade (-36,000) and in federal government (-4,000).
What is the quit rate?
The JOLTS report also shows the quit rate in August was 1.9%, down slightly from 2.0% in July. Quits went down in accommodation and food services (-113,000) and in arts, entertainment, and recreation (-48,000).
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, barring a government shutdown.
(Photo by Spencer Platt/Getty Images News via Getty Images)
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