August Jobs Report Confirms a Weakening U.S. Labor Market

Originally published on Substack. 

The first jobs report since President Trump dismissed the head of the Bureau of Labor Statistics came in weaker than expected. The U.S. economy added just 22,000 jobs in August — far below the forecast of 76,500 — while the unemployment rate rose to 4.3 percent, the highest since October 2021.

The details show a labor market that has been slowing for more than a year, even before Trump returned to office, and now faces new pressures from harmful tariffs, regulatory overhang, and policy uncertainty.
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The numbers themselves should dispel any illusion of a booming jobs market. This isn’t strength. It’s stagnation — and without a course correction, it could become stagflation.

​The Bureau of Labor Statistics report shows the cracks beneath the surface. Job revisions cut earlier months lower, reinforcing the reality that employment growth has been weakening for over a year. The August headline number — +22,000 jobs — barely moves the needle. Unemployment ticked up to 4.3 percent, and the number of long-term unemployed rose to nearly 2 million, now more than a quarter of the total unemployed.

Key sectors lost ground. Manufacturing employment fell by 12,000 jobs in August and is down by 78,000 over the year. Wholesale trade lost 11,700 jobs, while mining, quarrying, and oil and gas extraction shed another 6,000. Fortunately, the federal government reduced payrolls by another 16,000, helping trim bureaucratic bloat. The only gains came from health care (+31,000) and social assistance (+16,000), both weaker than recent averages and funded primarily at the expense of taxpayers.

Labor force participation remains stuck at 62.3 percent, down 0.4 percentage points over the past year. The employment-population ratio has also slipped, underscoring how fewer Americans are working relative to the overall population. More people are discouraged, working part-time involuntarily, or outside the labor force altogether.

Wages, meanwhile, show a mixed picture. Average weekly earnings rose 3.4 percent over the past year, running slightly ahead of core inflation at 3.1 percent. That’s a small win for workers, but hardly a victory. After years of paychecks being eaten by inflation, this is more of a pause than a rebound.
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The deeper issue is policy.

​Trump’s new tariffs and trade protectionism are already adding uncertainty to business investment, especially in manufacturing. Tariffs are simply taxes on Americans — they raise costs, reduce consumer choice, and make it harder for businesses to hire and grow. This is why the recent court decision striking down unilateral executive tariffs was so important. Trade policy belongs to Congress, not the executive, and if the Supreme Court upholds this decision, it will rein in one of the most harmful tools of economic populism.

On top of this, the benefits of Trump’s One Big Beautiful Bill (OBBB) haven’t yet been felt. The bill’s pro-growth reforms are still being phased in, while the economy continues to carry the weight of Biden’s regulatory overreach. The result is policy whiplash: Biden’s red tape combined with Trump’s tariffs creates an environment of uncertainty that discourages investment and hiring. Businesses don’t expand when they can’t see the rules of the game.

Then there’s the Federal Reserve. Some will argue this weak jobs report means the Fed should cut interest rates to “stimulate” the economy. That would be a grave mistake. The Fed’s mandate is price stability, and with core PCE inflation still running at 3.1 percent, well above the 2 percent target, loosening monetary policy now would only reignite inflation. More money chasing fewer goods, while job growth is flat, is the classic recipe for stagflation. We lived through that in the 1970s, and the lessons should not be forgotten.

​What we need is a return to pro-growth fundamentals. That means:

• Spending restraint in Washington, so fiscal policy doesn’t keep adding fuel to inflation.
• Free trade, not tariffs, so consumers and businesses benefit from lower costs and expanded opportunities.
• Regulatory reform, to clear out the rules that make it harder for businesses to expand and hire.
• Stable money, with the Fed focusing on bringing inflation down rather than chasing job numbers it can’t fix.

As someone living near Austin, Texas, I observe how these national policies impact the local economy. High housing costs, rising food prices, and job uncertainty squeeze families. Businesses struggle with trade disruptions and regulatory burdens. Texas remains an attractive destination for people leaving California and other high-cost states, but even here, bad federal policy makes prosperity harder.

The August jobs report is more than a monthly data point. It’s a worrisome trend. The U.S. labor market is weakening, and misguided policies are exacerbating the situation. If Washington continues down this road — tariffs, overspending, and monetary missteps — we risk slipping into stagflation.

The better path is clear. Empower markets, not government. Cut spending, end protectionism, and focus monetary policy on stable prices. That’s how we restore sustainable job growth and real wage gains. Anything else is just rearranging the deck chairs while the ship slows down.

Conclusion

The August jobs report confirms the trend: the labor market has been weakening for months, and now the slowdown is plain in the data. Tariffs and protectionism are adding to the drag, regulatory burdens remain heavy, and the Fed risks fueling inflation if it cuts too soon.

America doesn’t need more government intervention. It requires pro-growth reforms that trust people and markets. Only then can we move beyond stagnation toward genuine prosperity.