"Two Sectors Prop Up a Fracturing U.S. Job Market"

The U.S. labor market is showing signs of fragility, with recent data pointing to a growing concern among economists about the possibility of a "jobs recession." According to Mark Zandi, chief economist at Moody’s Analytics, the labor market is deteriorating, with only a handful of industries—particularly healthcare and hospitality—offsetting job losses in other sectors. The Bureau of Labor Statistics (BLS) reported that the U.S. added just 22,000 jobs in August 2025, far below the 76,500 expected. This weak performance brings total year-to-date job growth to a mere 600,000, a figure that would have been negative without the contributions of healthcare and leisure industries. Zandi emphasized that this concentration of job growth in only two sectors is a clear warning sign of an economy on the brink of recession [1].

The diffusion index, a key indicator of broad-based hiring, fell to 49.6 in August, with the three-month average at 47.9—readings below 50 indicate more industries are shedding jobs than adding them. Zandi noted that such a situation typically occurs during a recession. Additionally, less than half of the industries tracked by the BLS have added jobs over the past six months, further reinforcing his concerns. The healthcare and social assistance sectors have added 468,000 jobs year-to-date, while leisure and hospitality added 28,000 in August alone [1].

Zandi’s warnings are not isolated. Torsten Sløk, chief economist at Apollo Global Management, observed that industries affected by U.S. tariffs—such as manufacturing—have seen negative job growth. For example, manufacturers cut 12,000 jobs in August, marking the fourth consecutive month of declines in that sector. The U.S. unemployment rate climbed to 4.3% in August, the highest in nearly four years, with long-term unemployment also rising. More than 6 million people who were outside the labor force now want a job, up from 5.7 million a year ago [1].

Other troubling indicators include slowing consumer spending, which has seen its weakest growth since the 2008-09 financial crisis, and inflationary pressures that are expected to rise further. Zandi warned that the annual inflation rate, currently at 2.7%, could reach nearly 4% within the next year. This combination of weak job growth, rising unemployment, and inflationary pressures is creating significant economic vulnerability [2].

Despite these concerns, some government officials have taken a more optimistic stance. Treasury Secretary Scott Bessent argued that policies under the Trump administration are poised to create high-paying jobs and that the August jobs report may be subject to significant revisions. He also pointed to the Atlanta Fed’s GDP tracker, which suggests the third quarter is on pace for a 3% economic expansion [1]. Similarly, Commerce Secretary Howard Lutnick expressed confidence that the job market will rebound, attributing the current weakness to high interest rates and asserting that rate cuts will spur growth [3].

The labor market’s decline is also reflected in broader economic trends. The manufacturing sector, a focal point of Trump’s economic agenda, has lost 78,000 jobs so far this year. Tariffs on imports have added uncertainty and cost, contributing to a “paralyzed” manufacturing environment, according to Oxford Economics. Meanwhile, youth unemployment has climbed to 10.5%, nearly double the national average, highlighting the challenges faced by younger workers in a shrinking job market [3].

Financial markets have reacted to these developments, with the dollar index dropping 0.7% following the jobs report and gold prices hitting record highs. The weaker dollar has been interpreted as a sign of expected Federal Reserve rate cuts, with investors now pricing in a 12% chance of a half-point cut in September. The labor market’s weakness is prompting market participants to recalibrate their expectations for further rate cuts, with a 67.2% probability of a quarter-point cut in December [3].

Source:

[1] just a few industries are driving job growth, Zandi says | (https://fortune.com/2025/09/07/recession-warning-economic-outlook-zandi-healthcare-hospitality-jobs-report/)

[2] US economy very close to recession, warns Moody's chief economist Mark Zandi says for the average American that risk/ (https://timesofindia.indiatimes.com/technology/tech-news/us-economy-very-close-to-recession-warns-moodys-chief-economist-mark-zandi-says-for-the-average-american-that-risk-/articleshow/123745976.cms)

[3] America's job market flashes yet another warning sign (https://www.cnn.com/business/live-news/us-jobs-report-august-2025)