The latest jobs report indicates that the U.S. economy added a mere 22,000 jobs in August, with revisions revealing a troubling decline of 13,000 jobs in June. This disappointing figure has contributed to a rise in the unemployment rate, which has now reached a four-year high of 4.3%. In a recent note, Torsten Sløk, chief economist at Apollo Global Management, pointed out that job growth in sectors affected by tariffs is trending negative, with manufacturers cutting 12,000 positions last month alone.
In stark contrast to the manufacturing sector, the health care and social assistance sectors demonstrated resilience by adding 46,800 jobs. The leisure and hospitality industry also contributed positively, adding 28,000 jobs. However, this reliance on specific sectors for job growth raises concerns. Mark Zandi, chief economist at Moody’s Analytics, expressed his apprehension on social media, stating, “What’s perhaps most disconcerting about the flagging job market is how dependent it is on healthcare and hospitality for what little job growth is occurring.”
According to data from the Bureau of Labor Statistics (BLS), year-to-date job gains in the health care, social assistance, leisure, and hospitality sectors total 855,900. Without these sectors, the economy would be down by more than 250,000 jobs. Zandi noted that less than half of the industries tracked by the BLS have seen payroll increases over the past six months, a trend that typically signals a recession.
The diffusion index from the jobs report measures the breadth of job growth across industries. A reading below 50 indicates that more sectors have cut jobs than added them. In August, the index stood at 49.6, with a three-month average of 47.9, signaling a troubling trend in the job market.
Zandi has been vocal about his concerns regarding the economy, especially after the poor July jobs report. He warned last month that “the economy is on the precipice of recession,” citing weak consumer spending and declines in construction and manufacturing as significant factors. Following the August jobs report, Zandi reiterated these concerns, suggesting that the economy may already be in a recession. He highlighted the significant revision to June’s data, which showed a job loss, as a key indicator that downturns are typically marked by initial declines in payroll numbers.
Adding to the troubling picture, long-term unemployment has increased over the past year. More than 6 million individuals outside the labor force have expressed a desire for employment, up from approximately 5.7 million a year ago, according to BLS data. Zandi emphasized this concerning trend, stating, “This really feels like a jobs recession. Employment is flat to down. Output and incomes are still growing, but the economy is incredibly vulnerable.” He warned that any additional negative developments could lead to a full-blown downturn.
Despite these challenges, the economy remains in positive territory for now. The Gross Domestic Product (GDP) expanded by 3.3% in the second quarter, and the Atlanta Fed’s GDP tracker indicates that the third quarter is on track for a 3% increase. However, these positive indicators stand in contrast to the troubling employment figures.
On Sunday, Treasury Secretary Scott Bessent addressed Zandi’s comments regarding a potential jobs recession during an interview on NBC’s Meet the Press. He emphasized that policies are in place to generate high-paying jobs and noted that payroll data from August has historically been subject to significant revisions. Bessent attributed some of the current economic challenges to the Federal Reserve's delay in cutting interest rates. He expressed confidence in the administration’s economic policies, stating, “President Trump was elected for change, and we are going to push through with the economic policies that are going to set the economy right. I believe by the fourth quarter, we’re going to see a substantial acceleration.”
