Joe Weisenthal on a weak August jobs report: manufacturing down 78K, rate cuts now near-certain

Summary

August Jobs Report: Weak Headline, Worse Details

Joe Weisenthal, editor at Bloomberg, broke down an August payrolls report that came in solidly below expectations and, on closer inspection, was uglier than the headline suggested. The prior month was revised up slightly, but June was revised down sharply enough to turn negative — the first month of outright job losses since December 2020.

Healthcare added 31,000 jobs, which has become a structural fixture in every monthly report. Strip that out and the broader economy has been shedding jobs for some time. Manufacturing employment is down 78,000 so far this year, with another decline in August. Weisenthal is careful not to declare the tariff-driven reindustrialization strategy a failure — the tariffs only landed in April, and these things take time — but the direction in 2025 is clearly wrong relative to what the administration wants.

Two demographic signals are worth watching. Youth unemployment, ages 16–24, is rising at the fastest pace in 15 years outside of the pandemic, sitting at 10.5%. Black unemployment hit its highest level since October 2021. Even as the headline rate remains low by historical standards at 4.3%, these groups tend to show deterioration first, and what's showing up now looks like a real softening in job-finding ability for more marginal workers.

The AI Jobs Paradox

The White House held a dinner with tech leaders the prior evening, with investment pledges of $600 billion from Apple and $600 billion from Meta thrown around. Weisenthal argues those numbers shouldn't be expected to drive meaningful employment — building a data center is largely a check written to TSMC, not a domestic hiring event. More pointedly, if AI investments actually work, the payoff is labor displacement, not labor creation. Productivity gains free up resources, but that's different from direct job creation.

The Palantir data point is illustrative. The company's CFO said revenue has grown massively while headcount is up only 12%, and Palantir has stated explicitly it expects to have fewer people in the future. Weisenthal finds this striking because historically, sector stock performance near all-time highs has correlated with significant headcount expansion. That link appears to be breaking.

He also credits a cultural shift, partly attributable to Doge and Elon Musk, where executives across industries now feel comfortable publicly tightening headcount — especially after the hiring excesses of 2021, 2022, and 2023. Whether AI is driving actual efficiency gains or providing political cover for cuts is hard to separate.

The broader political problem, which Weisenthal extends some sympathy to the administration for, is that no one across the political spectrum has a credible answer to what the middle of the labor market looks like in a world of advancing AI. The dream — decent employment for people who aren't Stanford computer science PhDs — isn't matched by any concrete sector or policy roadmap.

Rate Cuts: September Is Now a Lock

Polymarket odds for three rate cuts in 2025 jumped from 18% to 38% on the back of this report. The probability of just one cut is falling. A September cut is now described as a near-certainty, with the live question being whether the Fed goes 50 basis points — an aggressive move similar to last September — rather than the standard 25.

Weisenthal had flagged at Jackson Hole that the labor market was clearly softening and that the case for cuts was building. He credits Fed Governor Christopher Waller as the most consistently dovish voice over the past six months, having argued forcefully that the labor market deterioration warranted action. The Powell-Waller view is now what markets are pricing.

The next Fed decision is approximately two weeks out. In the meantime, Weisenthal flags two near-term data points to watch. Weekly initial jobless claims — which print every Thursday and have been creeping higher, with the most recent read coming in at 237,000 above expectations — offer a real-time signal on whether the "low hiring, low firing" equilibrium is breaking toward actual layoffs. And this coming Tuesday, the QCEW benchmark revision (Quarterly Census of Employment and Wages) will reset historical labor market data using a complete sample of everyone who paid into the unemployment system. Weisenthal thinks it could show that job creation throughout 2024 was lower than previously reported — a backward-looking revision that would make the current picture look worse than the monthly series has suggested.