Unemployment Nears 4-Year High as Job Growth Stalls

After the sharp rebound from the pandemic, when businesses rapidly rehired and demand for workers exceeded supply by unprecedented margins, the U.S. labor market has gradually cooled. Job growth, which averaged several hundred thousand new positions per month between 2021 and 2023 and around 170,000 added jobs per month in 2024, has nearly come to a standstill, as the economy adjusted to tepid consumer spending, tighter financial conditions and a high degree of macroeconomic uncertainty.

Faced with tariff uncertainty and nagging recession fears, employers became increasingly cautious about adding staff, and while unemployment is still relatively low, it has gradually crept upwards over the past two years, reaching the highest rate since October 2021 in August. Following a steep downward revision of employment gains in May and June, job growth has nearly dried up halfway through 2025, with the three-month moving average of job additions falling from 232,000 in January to just 29,000 in August.

At his speech in Jackson Hole last month, Fed Chairman Jerome Powell stated that the labor market was still broadly in balance, although he admitted it was "a curious kind of balance", resulting from simultaneous drop-off in labor demand and supply. Despite this balance, Powell found that the risks in the labor market were skewed to the downside, clearing the way for a rate cut in September.