America’s job market, once the engine of the nation’s post-pandemic recovery, has hit a wall. On September 5, 2025, the U.S. Labor Department and Bureau of Labor Statistics (BLS) released data showing just 22,000 jobs were added in August—an anemic figure compared to the 79,000 jobs created in July and far below the 80,000 economists had expected. The unemployment rate, meanwhile, ticked up to 4.3%, its highest level since 2021, signaling a labor market that’s not just slowing, but stumbling.
“U.S. labor market deterioration intensified in August,” wrote Scott Anderson, chief U.S. economist at BMO Capital Market, in a commentary cited by the Associated Press. He warned, “Hiring was slumping dangerously close to stall speed. This raises the risk of a harder landing for consumer spending and the economy in the months ahead.”
For jobseekers like Alexa Mamoulides, the numbers hit home. Laid off in the spring from a research publishing company, she’s applied for 111 jobs and had 14 interviews—yet remains unemployed. “There have been a lot of ups and downs,” Mamoulides told the AP. “At the beginning I wasn’t too stressed, but now that September is here, I’ve been wondering how much longer it will take. It’s validating that the numbers bear out my experience, but also discouraging.”
The backdrop to this slowdown is a complex web of economic forces and policy choices. The lingering effects of 11 Federal Reserve interest rate hikes in 2022 and 2023 have cooled the economy. But the hiring freeze also reflects President Donald Trump’s economic agenda, including sweeping tariffs on imports, a crackdown on illegal immigration, and purges of the federal workforce. Factories shed 12,000 jobs in August and 38,000 so far this year, while construction companies—dependent on immigrant labor—cut 7,000 positions last month, marking three consecutive months of declines.
The federal government, targeted by both Trump and Elon Musk’s Department of Government Efficiency, slashed 15,000 jobs in August, according to BLS data. Since its peak in January, federal employment has fallen by 97,000. The BLS noted, “Federal government employment continued to decline in August (-15,000) and is down by 97,000 since reaching a peak in January.” These losses offset gains in healthcare and social assistance, which added nearly 47,000 jobs last month and now account for a staggering 87% of all private-sector jobs created in 2025.
Young workers are feeling the pinch most acutely. The unemployment rate for those aged 16 to 24 jumped to 10.5% in August, the highest since April 2021. Economists and researchers are increasingly pointing to artificial intelligence as a culprit. A Stanford University report found “substantial declines in employment for early-career workers—ages 22-25—in fields most exposed to AI.” Mamoulides herself suspects AI is edging her out of the market: “I know at my previous company, they were really embracing AI and trying to integrate it as much as they could into people’s workflow. They were getting lots of (Microsoft) ‘Copilot’ licenses for people to use. From that experience, I do think companies may be relying on AI more for entry-level roles.”
Manufacturers are also caught in the crossfire of Trump’s protectionist policies. Trick or Treat Studios, a California-based maker of horror masks and props, sources the majority of its materials from Mexico and China. Co-founder Christopher Zephro told the AP that his company’s tariff bill soared to $389,000 this year, forcing him to raise prices by 15% and lay off 15 employees—25% of his workforce. “That’s a lot of money that could have been used to hire more people, bring in more product, develop more products,” Zephro lamented. “We had to do layoffs because of tariffs. It was one of the worst days of my life.”
In the political arena, the reaction was swift. Democrats seized on the jobs report as evidence that Trump’s policies are damaging the economy. “Americans cannot afford any more of Trump’s disastrous economy. Hiring is frozen, jobless claims are rising, and the unemployment rate is now higher than it has been in years,” said Rep. Richard Neal of Massachusetts, as quoted by the AP. “The president is squeezing every wallet as he chases an illegal tariff agenda that is hiking costs, spooking investment, and stunting domestic manufacturing.”
The White House, for its part, struck a more optimistic note. Commerce Secretary Howard Lutnick told CNBC after the jobs data release, “I think they’ll get better.” White House Economic Advisor Kevin Hassett echoed this sentiment, calling the report “a bit of a disappointment” but predicting that unemployment rates “will revise up.” Hassett also claimed the economy is ready for the effects of Trump’s global tariffs.
Amidst the economic turbulence, President Trump has taken dramatic steps to reshape the federal response. After a disappointing July jobs report, he fired Erika McEntarfer, the commissioner of the Bureau of Labor Statistics, and replaced her with a loyalist. Trump has also repeatedly pressured Federal Reserve Chair Jerome Powell to lower interest rates, blaming him for the sluggish job growth. In a September 5 post on Truth Social, Trump wrote, “Jerome ‘Too Late’ Powell should have lowered rates long ago. As usual, he’s ‘Too Late!’”
The Federal Reserve, for its part, has kept its benchmark rate steady at 4.25% to 4.5% since July, citing “somewhat elevated” inflation and a still-solid labor market. The Fed’s Federal Open Market Committee is scheduled to meet again on September 16-17, with markets predicting an 87.8% chance of no rate change and a 12.2% chance of a cut, according to CME FedWatch data. Investors are now watching closely for the August inflation data, set for release on September 12, which could shape the Fed’s next move.
Some economists warn that the worst may be yet to come. James Knightley of ING pointed out that University of Michigan consumer surveys show 62% of Americans expect unemployment to rise over the next year, while only 13% expect it to fall. “People see and feel changes in the jobs market before they show up in the official data—they know if their company has a hiring freeze or the odd person here or there is being laid off,” Knightley wrote. “This suggests the real threat of outright falls in employment later this year.”
As policymakers, businesses, and workers alike brace for what comes next, the American labor market stands at a crossroads—caught between policy shifts, technological change, and the unpredictable tides of a global economy.
