To The Moon

On Friday, the U.S. Bureau of Labor Statistics reported that nonfarm payrolls rose by just 22,000 in August, way below the expected 75,000, while the unemployment rate ticked up to 4.3%. This continues the near-stall in job growth we’ve seen since April and adds to worries that the labor market is clearly losing momentum. After the release, markets quickly priced in a Fed rate cut in September, with odds of a November cut climbing to about 70%.

Source: U.S. Bureau of Labor Statistics

Labor Market Keeps Cooling

Healthcare added about 31,000 jobs, which partially offset cuts in federal government employment, as well as mining, quarrying, and oil & gas. Social assistance also added jobs. But manufacturing dropped 12,000, including a 15,000 decline in transportation equipment due to strikes. Wholesale trade and federal government jobs continued their slide—the latter has already lost about 97,000 positions since January’s peak.

Revisions painted an even weaker picture: June was revised down from +14,000 to –13,000, the first negative print since December 2020. July was nudged up to +79,000. Overall, June and July combined were cut by 21,000 jobs.

Wages, though, were steady. Average hourly earnings rose 0.3% MoM to $36.53, up 3.7% YoY, in line with forecasts. For production and nonsupervisory workers, pay was up 0.4% MoM to $31.46. But hours worked held flat at 34.2 for the third straight month, while manufacturing hours slipped to 40.0.

Labor force participation stayed at 62.3%, the employment-to-population ratio at 59.6%—both flat vs. last month but down 0.4 ppt from a year earlier. Long-term unemployed (27+ weeks) rose to 1.9 million, up by 385,000 YoY. Part-time for economic reasons held at 4.7 million.

One standout weakness was in oil & gas jobs, hurt by sliding WTI prices $ETFS WTI CRUDE OIL(CRUD.UK)$ . Despite the Trump administration’s “energy dominance” push—opening federal lands, speeding up permits, and backing LNG exports—U.S. drillers are under heavy stress. Layoffs have become routine: ConocoPhillips just announced a 25% workforce cut (~3,250 jobs), following Chevron’s earlier 20% cut (~8,000 jobs).

The industry is getting squeezed on multiple fronts: Trump’s trade policies are weighing on global growth and oil demand, prices are down to around $64/bbl (vs. $76 when Trump took office), and OPEC supply is adding to the glut. Meanwhile, Permian drillers face higher equipment costs from 50% steel tariffs, plus inflation pushing up insurance, pipeline, and labor costs. The EIA now expects U.S. crude production to fall from 13.4 mb/d in July to about 13.0 mb/d by the end of next year.

Market and Policy Reactions

Futures traders ramped up bets on cuts right after the jobs report. Odds of a 50 bps cut in September jumped to ~10% (from essentially zero before the release). Most still expect a 25 bps move, but markets are pricing in a string of additional cuts over the next few meetings.

Source: CME Fed Watch

By January, the market sees a 45% chance that rates drop to 3.25–3.50%, a full percentage point lower than today. November cut odds moved up from 45% to 70%.

Compared with Biden’s 2024 labor picture, Trump’s tighter immigration stance since taking office in 2025 has shrunk labor supply. At Jackson Hole, Fed Chair Powell even flagged how fragile the balance is—immigration restrictions are dragging down labor force growth and participation. This weak jobs report basically confirms his concern.

Fed Getting More Dovish

Several Fed officials have openly leaned dovish lately. Governor Waller said current rates are above neutral and he supports cutting at the next meeting, expecting more cuts over the next 3–6 months. Atlanta Fed’s Bostic argued the labor market slowdown justifies easing, with a 25 bps cut this year looking appropriate. Minneapolis Fed’s Kashkari put neutral around 3% and saw room for gradual cuts in coming years.

New York Fed’s Williams noted high rates are already cooling jobs, and if left unchanged, could hurt employment further. He sees growth slowing and unemployment rising to 4.5% next year.

Data Reliability and Risks

Remember, in 2024 nonfarm payrolls data had a reputation for being messy—headline numbers often got heavily revised. But after Trump fired BLS chief McEntaffer on August 1 (accusing her of political manipulation), big revisions have basically disappeared. That same morning, BLS had reported July payrolls at +73,000, below expectations, and cut prior months again. Commerce Secretary Lutnick later said reports would be “more accurate” going forward.

With just 9 days until the September FOMC, this jobs report is the last read before the decision. So markets won’t wait for revisions—this was the clincher. Powell’s earlier worries plus this print have pushed cut odds to the max, even triggering some chatter of more aggressive easing.

But here’s the caution: when expectations get this extreme—when “everyone knows” cuts are coming—markets can get blindsided. Sometimes all it takes is one piece of bad news to flip the narrative and spark a sell-off.

This week’s CPI probably won’t change September odds much, but CPI plus Powell’s post-FOMC press conference will heavily shape the path of cuts ahead. These turning points in expectations often drive the sharpest moves. So while the jobs report has locked in September, it’s a time to manage risk carefully—not let optimism run unchecked.

Invesight Viewpoint

August payrolls rose just 22,000, far under expectations, with unemployment up to 4.3%. It’s more evidence of a cooling jobs market. The report essentially locked in a September Fed cut, with odds of a November move now at 70%. Wages were steady, but sector cracks are showing—especially in energy. Labor participation is lower than last year, immigration curbs are biting, and Fed officials are openly preparing to ease.

The problem? Rate-cut bets are now maxed out. With the market this one-sided, the risk of a “buy the rumor, sell the news” moment is high. The next catalysts will be CPI and Powell’s press conference. Investors should stay cautious and not get swept away by the rate-cut euphoria.