The labor market continues to cool as ADP says just 54,000 jobs were added in August

Only 54,000 jobs were added to the private sector in August, according to the ADP National Employment Report published Thursday, marking a substantial decrease from July’s employment gains of 106,000. 

ADP’s report comes as 8,000 more people filed unemployment claims for the last week of August, pushing the total claims up to 237,000, according to the Department of Labor. It also follows just a day after the Bureau of Labor Statistics released data that showed the number of unemployed people, 7.2 million, surpassed the number of job openings, 7.18 million, in July. 

“The year started with strong job growth, but that momentum has been whipsawed by uncertainty,” Dr. Nela Richardson, chief economist at ADP, said in the release. “A variety of things could explain the hiring slowdown, including labor shortages, skittish consumers, and AI disruptions.”

Analysts say that uncertainty stemming from President Donald Trump's tariffs have made employers hesitant to hire and more likely to put their expansion plans on ice.

Heather Long, chief economist at Navy Federal Credit Union, described the lack of hiring as "another crack in the labor market."

"It's not healthy to have so little hiring. It's not dynamic," Long wrote in a social media post. "People can't grow in their careers. This is a frozen job market."

The weakened state of the job market will have spillover effects on U.S. workers. Allison Shrivastava, an economist at Indeed, said fewer job openings generally leads to "slower wage-growth for job switchers, limited opportunities and slower innovation."

Pay increased 4.4% year-over-year for workers who stayed in their jobs in August while those who switched jobs saw a pay bump of 7.1% year-over-year, the report found.

Some analysts are hopeful that ADP’s latest data coupled with the BLS data could further push the Federal Reserve to make the call to cut rates to stem the weakening labor market. 

“The Federal Reserve's free pass on the labor market has ended,” Jamie Cox, managing partner for Harris Financial Group, said in an emailed statement. “ADP data continue to reinforce the narrative that the rate of positive change in the labor market has slowed significantly, so you can expect the Fed to tilt its balance of risks to cut rates in September.” 

"We continue to see softness growing in the labor market as tariff policy uncertainty lingers, immigration changes take effect, and AI adoption grows," Eric Teal, chief investment officer for Comerica Wealth Management, said in an emailed statement. "The silver-lining is the weaker the jobs data the more cover there is for stimulative interest rate cuts that are on the horizon. The boost in the latter half of this year should come from easier monetary policy and stimulative fiscal policies to avoid further economic deterioration."

“The initial jobless claims and continuing claims data has been remarkably consistent (1940k for the most recent month and 1944k for the prior one) and so there is little to be gleaned today as we all await the biggest news of the week – the monthly payrolls report tomorrow, which will be pivotal in setting Fed rate cutting policy for this month and into the end of the year,” said Chris Zaccarelli, chief investment officer for Northlight Asset Management, in an emailed statement.

— Joseph Zeballos-Roig contributed to this article.