Kiplinger’s Economic Outlooks are written by the staff of our weekly Kiplinger Letter and are unavailable elsewhere. Click here for a free issue of The Kiplinger Letter or to subscribe for the latest trends and forecasts from our highly experienced Kiplinger Letter team.
The labor market has weakened significantly: Only 22,000 jobs were added in August, and job creation has averaged just 27,000 over the past four months. In addition, there was a low initial response rate to the August survey. As further data come in, the August number is likely to be revised down. Finally, the unemployment rate has ticked up in each of the past two months, though modestly so far.
Most sectors showed job losses, including mining, manufacturing, construction, wholesale, insurance, temporary help, and federal and state government. Health care, social assistance, and leisure and hospitality showed gains. Consumer spending also helped retail and e-commerce jobs to grow. The loss in state government jobs shows that federal spending cuts are starting to have an effect downstream.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Overall, the picture is of a weak labor market, with few sectors adding jobs outside of health care and social assistance. Even though the rise in the unemployment rate was small, edging up from 4.2% to 4.3%, the length of time workers are staying unemployed on average increased, and the number who were forced to work part-time because of poor economic conditions rose.
Wage growth ticked down to a 3.7% annual pace, and is expected to slow to 3.5% by the end of the year. Wage growth tends to lag other labor market indicators.
Consumer and business uncertainty about the economy will continue to delay hiring plans and should slow future pay gains. Hiring is often deferred when consumers are concerned about losing their jobs, or when businesses don’t know if there will be a positive return to investing in additional workers. Prior to the tariffs, we expected monthly job growth of about 150,000 new positions to continue. Now, that could disappear almost entirely, if enough employers decide to hold off on hiring while they sort out the effects of the new tariffs on both their businesses and on the economy as a whole.
The signs of a slowdown in the labor market make it certain that the Federal Reserve will cut interest rates at its policy meeting on September 17. The Fed is also likely to cut at its meetings on October 29 and/or December 17. It would have liked to wait longer to see what the impact of tariffs will be on inflation, but the weakening economy will take precedence over fighting inflation. The most immediate question now is whether the Fed could opt for a larger, half-point cut to its benchmark interest rate in September, or stick to the quarter-point cut that most forecasters are betting on.
Related Content
-
Savings Goal CalculatorTools Want to know how much you need to save each month to reach your financial goals? Our calculator helps you build a realistic savings plan.
-
Cash vs. Mortgage: How to Pay for Your Second HomeShould you buy your second home outright or finance it with a loan? Weigh the pros, cons and tax implications before making the leap.
-
5 Top Tech Disruptors to Watchmultibagger stocks Big change catalyzed by top tech disruptors often leads to big growth.
-
The Seven Best-Paying Side Gigs For RetireesIf you're worried you won't have enough saved for a comfortable retirement, or that life after work will be boring, these well-paid roles could be the answer.
-
$40,000 CD vs. $40,000 High-Yield Savings Account: 3 Things Savers Should Consider NowBoth options offer risk-free methods to grow your savings. Learn how much you can earn with each, how they differ and which one suits you best.
-
Gray Divorce Can Throw Your Retirement a Curveball: What to KnowIf you're entering retirement and going through a divorce at the same time, you've got some work to do to shore up your long-term financial security.
-
I'm a Real Estate Investing Expert: Optional 721 UPREIT DSTs Can Be the Best of Both WorldsBefore investing in any 721 UPREIT exchange, look for one that offers a straightforward, investor-friendly exit.
-
Markets Are Quiet Ahead of Fed Day: Stock Market TodayInvestors, traders and speculators appear to be on hold amid an unusually fraught Fed meeting.
-
5 Multibagger Stocks With Amazing Returns in 2025multibagger stocks As the term suggests, multibagger stocks multiply your money – gains of 1,200%, for example. Here's where to look for that kind of performance this year.
-
Investing Freebies: Perks You Get for Owning These StocksWhile the biggest investing returns come over the long term, these companies offer instant gratification for investors with several freebies and perks.
