The U.S. labor market lost momentum in August, with private-sector hiring rising by just 54,000 jobs, according to data released Thursday by payroll firm ADP. The result fell short of the 75,000 jobs expected by economists and marked a sharp slowdown from July’s revised gain of 106,000.

Job Growth Loses Steam

The August figures highlight a broader cooling trend in employment growth. At the start of the year, hiring was strong, but recent months have shown a steady weakening as businesses navigate economic uncertainty, persistent worker shortages, and technology-related disruptions.

Sector Breakdown

The slowdown was uneven across industries.

1. Trade, transportation, and utilities recorded a net loss of 17,000 positions.
2. Education and health services contracted by 12,000 jobs.

By contrast, the leisure and hospitality sector continued to expand, adding 50,000 roles in August. This growth helped offset some of the losses elsewhere, underlining the sector’s ongoing recovery.

Wages Remain Stable

Pay growth held steady during the month. Employees who remained in their roles saw wages climb 4.4% compared with a year earlier, while job changers secured a stronger 7.1% increase. This consistency suggests wage pressures remain resilient even as hiring activity slows.

Signs of a Weaker Labor Market

Additional data released this week reinforced concerns about the labor market’s health. Weekly jobless claims rose to 237,000, higher than expected and up 8,000 from the prior week. Meanwhile, the government’s Job Openings and Labor Turnover Survey (JOLTS) showed job vacancies falling to one of the lowest levels since 2020.

Attention now turns to the official nonfarm payrolls report due Friday. Economists anticipate the addition of roughly 75,000 jobs in August, alongside a slight uptick in the unemployment rate to 4.3% from 4.2%.

Market Implications

The weaker employment data has added weight to expectations that the Federal Reserve will cut interest rates at its upcoming meeting. Market pricing now indicates a 97.4% probability of a September rate cut, up from 96.6% the day before, according to the CME FedWatch Tool.