U.S. Employment (August 2025)

Labor market shows further signs of weakness in August  

• Non-farm employment increased by 22k in August, short of Bloomberg's consensus forecast of 75k, but nearly right on top of our forecast. 
  
  • Job gains for the prior two months were revised lower by a total of 21k.
  • Over the past three months, non-farm payrolls averaged 29k jobs, well below the twelve-month average of 122k.
• Private payrolls rose 38k – down from 77k reported in July – with most of the gains concentrated in health care & social assistance (+46.8k), leisure & hospitality (+28k) and retail trade (+10.5k). Meanwhile, goods producing industries (-25k), professional & business services (-17k) and government (-16k) all shed jobs on the month. The manufacturing sector has now released 42K workers since May, in a four-month string of steady monthly job losses. 
• In the household survey, the labor force (+436k) shot higher – following declines in each of the prior three months – eclipsing a smaller gain in civilian employment (+288k) and pushing the unemployment rate up to a new cyclical high of 4.3%. The labor force participation rate ticked up to 62.3% (from 62.2%). 
• Average hourly earnings (AHE) rose 0.3% month-on-month (m/m) – matching July's gain. On a twelve-month basis, AHE were up 3.7% (from 3.9% in June).

Key Implications

• There's no escaping that the labor market is softening, and quickly. Once again, there was a low response rate in the August survey, at less than 60%. This suggests we could see further downward revisions in next month's release when the response rate typically returns to 90% or more. Further signs of weakness were also evident in the household survey, where measures of unemployment and underemployment each reached new cyclical highs of 4.3% and 8.1%, respectively.
• Fed officials have become increasingly concerned about the downside risks to the labor market, and this morning's report will not assuage those fears. We maintained an out-of-consensus view since April that the Federal Reserve would need to deliver 75 basis points in rate-relief this year, and our conviction remains high that it will occur. Markets are increasingly moving to that view. As for that first step, Fed futures are fully priced for a September rate cut.

Disclaimer

This report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.