US labor market shows strains as jobless claims rise, private payrolls growth slows

Thu, Sep 4, 2025, 8:46 AM 3 min read

By Lucia Mutikani

WASHINGTON (Reuters) -The number of Americans filing new applications for jobless benefits increased more than expected last week, while hiring by private employers slowed in August, offering further evidence that labor market conditions were softening.

The reports on Thursday came on the heels of government data on Wednesday showing there were more unemployed people than positions available in July for the first time since the COVID-19 pandemic. Job growth has shifted into stall-speed, with economists blaming President Donald Trump's sweeping import tariffs and an immigration crackdown that is hampering hiring at construction sites and restaurants.

The slackening labor market likely positions the Federal Reserve to resume cutting interest rates later this month, though much would depend on August's employment report that is scheduled to be published on Friday.

"We continue to see softness growing in the labor market as tariff policy uncertainty lingers, immigration changes take effect, and AI adoption grows," said Eric Teal, chief investment officer at Comerica Wealth Management. "The silver-lining is the weaker the jobs data, the more cover there is for stimulative interest rate cuts that are on the horizon."

Initial claims for state unemployment benefits rose 8,000 to a seasonally adjusted 237,000 for the week ended August 30, the Labor Department said. Economists polled by Reuters had forecast 230,000 claims for the latest week. There were significant increases in unadjusted claims in Connecticut and Tennessee.

The number of people receiving benefits after an initial week of aid slipped 4,000 to 1.940 million during the week ending August 23, the claims report showed.

The still-high so-called continued claims are a reflection of a reluctance by businesses to increase headcount. The Fed's "Beige Book" report on Wednesday noted that "firms were hesitant to hire workers because of weaker demand or uncertainty."

U.S. stocks opened mixed. The dollar rose against a basket of currencies. U.S. Treasury yields fell.

The claims data have no bearing on the closely watched employment report for August scheduled to be released on Friday as they fall outside the survey period.

Economists are bracing for another month of tepid job growth. Those expectations were reinforced by the ADP National Employment Report showing private employment increased by 54,000 jobs last month after advancing 106,000 in July. Economists had forecast private employment increasing by 65,000 jobs.