Deloitte Insights and the research centers deliver proprietary research designed to help organizations turn their aspirations into action. From data visualizations to expert commentary, the video content delivers concise, actionable information to help you lead with clarity in a complex world. Ira Kalish is the chief global economist of Deloitte Touche Tohmatsu Ltd. He is a specialist in global economic issues and the effects of economic, demographic, and social trends on the global business environment. In August, only 22,000 new jobs were created from the previous month. The June and July numbers were revised, with the new data showing a decline in employment in June but somewhat faster employment growth for July than previously reported. In August, job growth was either feeble or negative in most industries. The major exceptions were health care and social assistance (up 46,800), and leisure and hospitality (up 28,000). When these two categories are excluded, the numbers show that there was a sharp decline in employment in August. By industry, employment was down 7,000 in construction, down 12,000 in manufacturing, down 5,000 in information, down 3,000 in financial services, down 17,000 in professional and business services, and down 16,000 in government. The establishment survey also provides data on earnings. In August, average hourly earnings of private sector workers were up 3.7% from a year earlier—the second lowest rate of increase since May 2021. Wage pressure is gradually easing, given the weak demand for labor. Fortuitously for workers, earnings are rising faster than inflation, thereby boosting household purchasing power. Even as demand for labor decelerates, the supply of labor is falling, in part due to restrictive immigration policy. If inflation accelerates sharply due to tariffs, it will undermine consumer purchasing power. The household survey found that the labor force grew faster than the working-age population, leading to a small increase in the rate of participation. Yet employment grew considerably more slowly than the labor force, thereby leading to a slight increase in the unemployment rate. It hit 4.3%—the highest since October 2021. There was a sharp increase in the unemployment rate for workers lacking a high school education but no change for college graduates. Unskilled workers are facing obstacles to employment. In response to the jobs report, the yield on the US Treasury’s 10-year bond fell to 4.1%—the lowest in 10 months. This reflects expectations that the economy is weakening, thereby reducing inflationary pressures and increasing the likelihood of the Federal Reserve easing monetary policy. Equity prices fell as well. The futures markets are now pricing an 89% probability that the Fed will cut the benchmark rate by 25 basis points this month and a 10% chance of a 50-point cut this month. Moreover, there is a 91% probability that the Fed will cut the rate two or three times before the end of the year, and a zero likelihood of no rates cuts by December. This includes a 64% probability of three rate cuts by the end of the year. Many investors are now highly optimistic that the Fed may engage in an aggressively easy monetary policy. The job openings rate was highest in information, accommodation and food service, and professional business services. The rate was lowest in mining, wholesale trade, and durables manufacturing. From a year ago, the overall job openings rate fell from 4.5% to 4.3%. However, in some industries, there was a notable increase in the job openings rate. These industries included construction, transportation and warehousing, information, and accommodation and food service. Some of these industries are heavily dependent on migrant labor. The drop in immigration and the increase in deportations might explain some of this increase. It could also lead to stronger wage pressure in these industries, thereby exacerbating inflation. On the other hand, some industries saw a sharp decline in the job openings rate. These included mining, durable goods manufacturing, and health care and social assistance. The decline for manufacturing could be related to trade uncertainty and disruption. The state of the US job market has weakened. Still, the job openings rate is relatively high while the unemployment rate is relatively low. Thus, it is not clear if the weakness is sufficient to cause concern about the economy being sufficiently weak to warrant an easing of monetary policy. The Federal Reserve has a dual mandate to seek low inflation and maximum employment. Currently, inflation is above the Fed’s target and appears to be accelerating while employment growth has eased. Thus, the Fed faces a trade-off. Meanwhile, one sign of economic strength is that financial market conditions in the United States are relatively favorable. This is evidenced by the national financial conditions index published by the Federal Reserve Bank of Chicago. That index shows that, currently, the United States has the most favorable financial market conditions since November 2021, during the pandemic. This is due to the lagged effect of the Fed’s easy monetary policy, which began in 2024. Given that conditions are so favorable, it is not clear that it makes sense to ease policy further at a time when inflation is a growing concern. Prior to the pandemic, the index was even more favorable in the 2018-to-2020 time frame. Yet that was a time of historically low inflation. As such, there was no need to tighten monetary policy at that time. On the other hand, household financial conditions have worsened, with the delinquency rate on credit card debt now at the highest level since just after the global financial crisis in 2011. The delinquency rate on automotive loans has also increased considerably. Plus, the end of the moratorium on student debt has led to a further increase in financial stress for student debtors. The challenges faced by the household sector provide an argument in favor of monetary easing. It is nearly a certainty that the Fed will cut the benchmark interest rate later this month, likely starting a gradual process of easing monetary policy. This could come in conjunction with a further acceleration in inflation. That would be an unusual combination of events. This means that the absorption of the tariffs is mostly taking place on the US side of the Pacific Ocean.