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- U.S. payroll growth slowed sharply in August, with unemployment rising to 4.3% and continued weakness in manufacturing and trade.
- U.S. manufacturing indexes showed signs of stabilization last week, with output rising despite higher costs and uneven momentum across surveys.
- Equities face seasonal headwinds in September and October, but growth, earnings, and consumer spending continue to provide underlying support.
1. August Jobs Report Shows Sharp Hiring Slowdown, Unemployment Rises
The U.S. labor market showed signs of further slowing last week. Nonfarm payrolls increased by 22,000 in August, well below the expected 75,000, while the unemployment rate edged up to 4.3%, according to the Bureau of Labor Statistics (BLS). Revisions lowered prior data, with June showing a net loss of 13,000 jobs and July revised upward slightly to 79,000.1
Hiring remained concentrated in health care and social assistance, which added 31,000 and 16,000 jobs, respectively. In contrast, manufacturing and wholesale trade each lost 12,000 positions, while federal government payrolls declined by 15,000.1 The BLS Current Population Survey, also known as the household survey, which helps determine the jobless rate, showed increases of 288,000 employed and 148,000 unemployed, as labor force participation ticked higher to 62.3%.1
The employment report increased expectations that the Federal Reserve will cut interest rates at its September 17th meeting on the basis that policymakers are concerned about slower hiring, even as overall economic growth and consumer activity remain resilient.
2. Manufacturing Data Signals Stabilization Amid Cost Pressures
Last week’s data pointed to some stabilization in U.S. manufacturing. The final S&P U.S. Manufacturing Purchasing Managers Index (PMI) for August climbed to 53.0, up from 49.8 in July.2 This marked a return to expansion territory, with increased production and stronger new orders driving the gains. Companies also increased their inventories of finished goods, reflecting concerns about future price trends and possible supply disruptions. Rising input costs, often linked to tariffs, continued to pose challenges to many firms.
The Institute for Supply Management’s (ISM) Manufacturing PMI also improved in August, rising to 48.7 from the prior month which was at 48.3 However, the reading stayed below the 50.0 threshold that signals contraction and fell short of expectations for a larger rebound. Within ISM’s survey, new orders and supplier deliveries were the strongest components, while employment and production weighed on results.
Taken together, the reports suggest the manufacturing sector is moving through a period of uneven growth. While cost pressures persist, manufacturing activity appears stable enough to provide some support for the broader economy.
3. Equities Enter Historically Volatile Season with Fundamentals Still Firm
Last week marked the end of a strong summer rally, and stocks are now entering what is generally considered a more volatile season. September and October have historically seen wider swings and weaker returns. Historical data shows that volatility during these months is usually temporary, with performance often improving later in the year.
Fundamentals remain an important counterbalance to these seasonal factors. The U.S. economy is still expanding, though growth has moderated compared with earlier in the year. Corporate earnings for the most recent quarter have generally exceeded expectations, indicating ongoing resilience across several industries. Monetary policy also appears to be shifting toward a more supportive stance, which may help stabilize conditions in the months ahead.
In the retail sector, Macy’s raised its annual outlook last week and reported its strongest sales growth in three years. The results underscored the durability of consumer spending, even with inflation and tariff-related pressures still present. As autumn begins, markets appear set to balance seasonal volatility with continued fundamental strength.
For the period ending 9/5/25.
* Small-cap stocks are represented by the Russell 2000® Index. International stocks are represented by the MSCI EAFE. Bonds are represented by the Bloomberg US Aggregate Bond Index. Oil is represented by WTI Oil (West Texas Intermediate Oil), a benchmark for light, sweet crude oil and a primary measure for pricing oil contracts and futures in the U.S.
Sources
1 Bureau of Labor Statistics
2 S&P
3 Institute for Supply Management
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A Composite PMI is a single index that tracks economic activity by combining the performance of both the manufacturing and services sectors, providing a comprehensive overview of overall business conditions.
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Additional Disclosures: International and Foreign Securities, Fixed Income Investments, the Consumer Price Index, the Producer Price Index.
Comparative Index Descriptions: The Standard & Poor’s (S&P) 500 Index, The Russell 200® Index, The NASDAQ Composite Index, The MSCI EAFE Index, Dow Jones Industrial Average® (Dow Jones or DJIA), The Bloomberg Barclays US Aggregate Bond Index (US Agg Bond), The CBOE Volatility Index (VIX). CSP2025061_25
