Fair Observer and Jiahao Yuan
After a strong rally in the S&P 500 in August, the US stock market entered September, a typically weak month, with a slight correction. Over the past decade, September has been the worst-performing month for the S&P 500, with an average return of just -0.6%. The index has declined in September in six of the past 10 years.
The most direct trigger for this decline was the latest report released by the US Bureau of Labor Statistics on September 5. According to the report, non-farm payrolls increased by only 22,000 in August, far below market expectations of 75,000, indicating a significant slowdown in job growth, possibly even stagnation.
Furthermore, the employment figures for June and July were revised downward by a combined 21,000, further confirming the deteriorating labor market trend. As a result, market expectations of a rate cut by the Federal Reserve at its meeting on September 17 rose sharply, leading to a decline in the US dollar index and a surge in spot gold prices.
The recent slowdown in US job growth can be primarily attributed to two factors: first, the Trump administration’s comprehensive imposition of import tariffs, which has led to a sharp increase in business costs and discouraged hiring; and second, tightened immigration enforcement, which has directly reduced the labor supply.
Despite a 0.3% month-over-month increase in average hourly earnings, signs of a cooling overall job market are clear. Beyond the non-agricultural data, other labor market indicators are also flashing red flags, including a slowdown in private sector hiring, rising initial unemployment claims, increased layoff announcements and, for the first time in four years, a situation in which job seekers outnumbered job openings. This suggests a labor market stalemate characterized by “low hiring and low layoffs”, with liquidity nearing a standstill.
Concerns over job growth in specific sectors showed significant divergence. Healthcare and social assistance continued to be the primary drivers of job growth, adding 31,000 and 16,000 jobs, respectively. However, federal government employment was sure to be the primary drag, declining by 15,000 in August and totaling 97,000 since its peak in January.
Furthermore, wholesale trade employment continued to decline, falling by 12,000. This stagnant state of low liquidity is highly unstable; in the event of an external shock, unemployment is likely to soar rapidly, thus creating greater macroeconomic uncertainty.
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