NFP job data indicates US stagflation amid Trump reality shows

 

·         Trumpcession may be imminent amid Trump policy uncertainty, and a veiled effort to convert the US into a major manufacturing hub at the tariff gun point

·         The US economy may face both supply and demand shocks in the coming days

·         The US private sector is not willing to go for fresh capex/expansion and hiring amid Trump’s policy flip-flops

On Friday, September 5, 2025, apart from the daily dose of Trump reality shows, some focus of the market was also on the U.S. NFP/BLS job report for August’25, which may help the Fed to make a firm decision about any rate cuts at the next September 17 FOMC meeting. Fed will also consider the core CPI and PPI inflation reports to be released in mid-September during the blackout period. Also, the Fed will consider overall average data for at least the past three/six months and the outlook thereof before any policy decision rather than only one/two months of economic data.

On Friday, the latest BLS establishment survey flash data (seasonally adjusted) shows that the U.S. economy (Private + Public/Government sector) added only +22K Non-Farm Payroll (NFP) jobs in August’25 against 79K sequentially (m/m); +70K yearly (y/y), lower than the median market expectations of 75K. The US NFP employment covers public (government) and private sector employees/jobs, excluding the farming/agri industry.

After the latest revisions, the 3M rolling average (3MRA) of US NFP job additions was around +29K against +71K in August 2024. The 2025 average (YTM) was around 75K against +216K in 2024 and 191-166K in 2018-19 (pre-COVID-Trump trade war 1.0). Overall, the CAGR from 2018 is now around +0.98% with an average R/R of around +125K jobs/month. The June contraction of -13K NFP jobs is the first after the December’20 COVID era. The US job market may now be under meaningful stress due to Trump’s bellicose policies on tariffs, immigration & deportation despite the so-called big & beautiful bill (fiscal stimulus).

Although, the Fed’s preference was around +200K (175-225) in the pre-COVID era; considering a higher labor force amid higher immigration and a higher working-age population, the Fed may now prefer +225K average run rate of NFP Payroll job addition for its maximum employment mandate, while the red line may be +175K (against pre-COVID levels of +150K). But after Trump’s anti-immigration steps, and subsequent lower growth in the US labor force, the Fed may stick to the pre-COVID era standard R/R of +150K/M NFP job addition or even lower to keep the US unemployment rate below 4.5% orange line zone.

On Friday, the BLS flash data also shows the U.S. private sector (only private establishment/business employees) added +38K payroll jobs in August’25 against an addition of around +77K sequentially (m/m) and +33K yearly (y/y), lower than the median market expectations of +75K. The August’25 NFP private payroll job addition of +38K is also lower than the ADP figure of +54K (released Wednesday).

After the latest revisions, the 2025 (YTM) average of US private payroll job addition was around +74K against the 2024 average of +130K, against the 2018-19 average of 180K and 148K. The pre-COVID longer-term (2014-29) average private payroll job addition was around +174K, indicating significant stress in the private sector, amid Trump policy uncertainty.

Overall, after the latest revisions, BLS data indicate +74K private NFP job additions for the US economy in 2025 (YTM-August) against ADP data of +80K/M on average; i.e., both BLS and ADP data are converging gradually after reconciliation and as the year progresses. The 3MRA is now around 29K (BLS) vs 46K (ADP), indicating a potentially better NFP job addition number going forward to catch up with the ADP.

On Friday, the BLS Establishment survey flash data also shows the Government payroll, i.e., employment in Federal, state, and local governments contracted around -16K jobs in August’25 against +2K addition sequentially (m/m); +38K yearly (y/y), and lower than the market expectations of 0K (NIL addition). After the latest revision, the 2025 (YTM) average for the US government payroll was around +1K against +38K in 2024 and 11-18K in 2018-29. The longer-term pre-COVID (2014-19) average government was around +36K. Federal Government payroll jobs under Trump 2.0 are now under huge stress due to Trump’s perceived & flawed fiscal austerity narrative and DOGE plan. Trump is now trying to abolish as many Federal Government jobs as possible to make the US economy driven by only the private sector, ensuring higher efficiencies and productivity. But this policy is not working and no economy in the world can survive only on the private sector.

In August’25, the US NFP payroll was boosted by job gains in private education & health services, leisure  & hospitality, retail trade (Festive sales boost), transportation & warehousing and some other services, while dragged by government, professional & business services, construction, financial activities, and information (tech), wholesale trade, manufacturing, mining & logging, and utilities.

As per ADP:  “The year started with strong job growth, but that momentum has been whipsawed by uncertainty. A variety of things could explain the hiring slowdown, including labor shortages, skittish consumers, and AI disruptions.”

Overall, in the last six months, under Trump 2.0, the US economy has lost significant jobs both in the private and government sectors. In summary, for the last six months, private education & healthcare services were the biggest employers for the US economy (as usual), followed by leisure & hospitality (travel/tourism & hotels), financial activities, other services, retail trade (front running higher tariffs) and utilities to some extent, while dragged by government (Trump’s austerity policy), construction, transportation & warehousing, wholesale trade, and professional & business services, manufacturing, mining & logging and information/techs (due to mainly AI disruption). 

Housing/construction is always a bright spot for the US economy, where the present supply is lower than demand due to the increasing population/immigrants. The US is a service-heavy economy and for the last few years has not been able to compete with China, the undisputed global leader in manufacturing not only consumer durable goods but also EV/Cars, AI chips, and even has growing footprints in civilian and military airplanes/jets.

The U.S. economy is primarily a service sector-oriented economy (unlike China) and the service sector is the biggest contributor to the economy, but that too is significantly dependent on millions of immigrants, students, patients, and tourists from developing countries like India, Bangladesh, Pakistan, Sri Lanka, and other major South Asian/American/African countries and even China due to better standard of living, better democracy (freedom of speech/after speech), better pay, lower cost of living (price stability) and also currency leverage (USD being the ‘king’).

But, in the last few months, Trump's policy uncertainty has also affected construction and private education & health care services in the U.S. Also, despite Trump’s stress on manufacturing within the US amid tariff threats, manufacturing jobs are not getting a boost right now; it may take 3-5 years for the US manufacturing to show some results. And by then, Trump will leave the White House; it’s not sure whether the next admin will follow Trump’s bellicose policies and thus, companies are going slowly.

The US, the world’s largest economy, is the land of immigrant talents and innovation, unlike many other Western countries and Japan, suffering from demographic headwinds (ageing population/workforce). The demand for US private education and healthcare is huge among not only rich Americans but also foreigners, especially from developing countries like India, Bangladesh, and even China.

Also, big corporate families from various developing countries like India, and China usually send their children for education in the US to not only earn respectable degrees from world renewed institutions but also for business working as children of almost all big business houses in the world including the US/UK/EU are also studying in those big US educational schools/colleges/universities/ professional institutes. This is to make business deal-making easier in the future (business networking).

The US is also a manufacturing powerhouse in airplanes (civilian & military), high-end AI chips, etc. The US is the destination land of bright immigrants and innovation, with its relatively soft immigration policies in the past. The US also needs a significant number of skilled, semi-skilled immigrants as prospective workers/labor force to make the overall labor market in Goldilocks state to ensure price stability.

In the US, relatively liberal immigration policies and lower unemployment than most of the G7 countries are also ensuring moderate US economic growth, rather than a stagflation/deflation-like economic situation in almost all other G7 countries. The US is a land of immigrants & equal opportunities. Even an Asian-American/Indian-American may be the CEO of an American MNC giant like Google or become a VP or even President of the US, which is unthinkable in India, the biggest democracy in the world.

As per the latest revision in the establishment survey, the change in total nonfarm payroll (NFP) employment for June was revised down by -27K to -13K, and the change for July was also revised up by +6K to +79K. With these revisions, NFP employment in the last two months combined was revised down by -21K than previously reported. With the latest monthly revisions, the US economy added an average of around +75K payroll jobs (NFP) in 2025 (YTM) against the pre-COVID (2015-19) long-term average of +187K, and the Fed’s goldilocks target/preferred rate around +200K (175-225K), to keep an overall unemployment rate below 4.5%, which is Fed red line (long term sustainable unemployment rate keeping average core inflation around +2.0% as price stability).

BLS vs ADP private payroll survey

The average divergence between NFP and ADP private payroll monthly job addition numbers is now decreasing amid the increasing adoption of real-time ADP payroll processing software in private establishments. But, overall, a nominal number of US NFP Private Payroll employees is still higher by around 1350K in the BLS survey than ADP at present, on average against 1600K in pre-COVID times.

In both the BLS establishment survey and the ADP private payroll survey, individuals who hold multiple payroll jobs are usually counted multiple times based on surveys/payroll processing software. The BLS survey collects data from business establishments and counts the number of employees on their payroll, regardless of whether they have one or multiple jobs. If someone holds multiple jobs and one of those jobs uses ADP for payroll processing, only the primary job with ADP would be counted in the survey; if the multiple jobs are in another company that does not use ADP payroll software/system, they will not be counted twice. This also partly explains about frequent divergence between ADP and BLS/EST surveys. Additionally, the BLS EST survey samples a much larger number of establishments, around one-third of all nonfarm payroll jobs, compared to the limited ADP survey which is based on data from ADP's client companies, using ADP payroll processing software/system.

The ADP Report is based on the actual anonymized and aggregated payroll data of more than 25 million U.S. employees. The BLS survey samples a much larger number of establishments, around one-third of all nonfarm payroll jobs, compared to the ADP survey, which is based on data from ADP's client companies, using ADP payroll processing software/system only. The BLS surveys about 141K businesses and government agencies, representing approximately 486K individual work sites, to provide detailed industry data on employment, hours, and earnings of workers on nonfarm payrolls under the Current Employment Statistics (CES) program.

The larger sample size of the BLS survey allows it to provide a more comprehensive and accurate representation of the overall employment situation in the US. Furthermore, the BLS survey uses more rigorous statistical methods and adjustments to account for seasonal variations, business births/deaths, and other factors that can impact population/labor force and employment data. This helps the BLS survey provide a more reliable and consistent measure of nonfarm (NFP) payroll employment than ADP, but ADP is also providing almost real-time data.

The BLS survey is based on a sample of business establishments, while the ADP survey is based on payroll data from businesses that use ADP for payroll processing. Differences in sampling methods, sample sizes, survey periods, and data collection techniques can lead to variations in the reported figures. The BLS establishment survey and the ADP private payroll survey are conducted at different times of the month, which can also contribute to variations in the reported figures.

In any way, the BLS/US government should ensure proper employment surveys using real-time payroll processing software or some other credible digital method in this digital age (rather than using the old-fashioned, unreliable/unverified telephonic/postal survey) for the largest economy and most importantly central bank (Fed) in the world.

The Fed is also often very confused about the US BLS data, especially for employment situations. Fed has to make contradictory/unexpected policy decisions and even make policy errors or often find itself behind the curve for unusually large revisions even after one year. The BLS should ensure employment data is final and locked after 2 months, not 12 months to avoid wild swings and make the Fed’s job more difficult.

The BLS Household Survey

On Friday, the BLS household (HH) survey data indicated the nominal number of the US civilian noninstitutional population (>16 years of age) increased by +216K to 274001K in August’25, while the labor force also increased by +436K to 170778K. The labor force participation rate was 62.3% vs 62.3% sequentially and against the pre-COVID average participation rate of around 63.1%; while 2006 levels were around 66.4% (pre-GFC days).

The current 2025-YTM of labor force addition was around +279K against the Non-Institutional Civilian population (working age above 16 years) growth of +545K, while the labor force participation rate at 62.4%. The labor force addition average rate was 223K in 2018 (pre-COVID).

As per the BLS Household (HH) survey, the U.S. economy has added +288K employed persons in August’25, against the deduction of -260K sequentially (m/m) and the addition of +206K yearly (y/y). The U.S. had 163394K employed persons in August’25. As per the BLS household survey, the average number of additions of employed persons for 2025 (YTM) was +217K in August’25 against the 2024 average of +45K, 2018 average of +243K.

The Fed may also prefer around +200K (175-225K) average additions of US employed persons as a sustainable long-term trend rate to achieve/sustain maximum employment.

The US BLS HH survey includes non-farm payroll (NFP) employees (Private + Public/Govt) and self-employed persons (including professionals, contractors, and agri workers). As per Household survey data, the nominal number of unemployed persons increased by +148K to 7384K in August’25 against 7236K sequentially (m/m) and 7071K yearly (y/y). In August’25, the U.S. unemployment rate edged up to 4.3% from 4.2% sequentially (m/m), 4.2% yearly (y/y), and lower than the market expectations of 4.2%.

The 2025 (YTM) average unemployment rate was 4.2% in August’25 and against the 2018-19 average rate of 3.9-3.7%; the current 3M rolling average of the unemployment rate was 4.2%, still below the Fed’s 4.5% red line. Fed’s minimum unemployment may be around 3.5% on a durable basis; i.e., 96.5% employment rate, which is now around 95.8% in YTM-2025. Fed also regarded a 4.0% average as a sustainable longer-term unemployment rate; i.e., 96% employment rate as the maximum for the Goldilocks nature of the US economy.

Further fine prints of BLS H/H survey data indicate the US NFP (Payroll) employment (Private + Public) was around 89% and the rest self-employed + agri workers around 7% historically, as maximum employment ~96%

Now, employees constitute around 89.1% of the labor force, while self-employed persons constitute around 6.7%, and while overall employment rate is around 95.8% on average in 2025 (YTM).

Self-employed persons

 

Around 17.5% of employed persons are part-time workers.

FINE PRINT OF HH SURVEY DATA

FINE PRINT OF HH SURVEY DATA

Multiple jobholders, higher unemployment rate:

Overall, as per BLS seasonally adjusted data, now almost 5.4% of employed persons are multiple jobholders in 2025 (YTM) against 5.0% in 2018 (pre-COVID), equivalent to a higher unemployment rate.

The increasing number of multiple job holders over the years may be explained by:

·         People may be taking additional full-time/part-time jobs (WFH) to meet the increasing cost of living (still 25% higher inflation than pre-COVID times)

·         Fear of sudden layoffs/salary cuts during any financial crisis (like COVID, 2007 GFC)

·         The flexibility of WFH, higher productivity for both employees and employers (part-time/freelancers may do the same work more efficiently at lower pay than regular full-time employees),

·         Sometimes lack of experienced workers for a specifically required skill; a flexible mix of WFH/WFO (remote/onsite) may be more positive for overall labor productivity and lower inflation

The US BLS NFP/Establishment survey may count multiple jobs multiple times (if a person is doing two or more multiple payroll jobs at a time in WFH/remote mode or even physically in two/three shifts), while the BLS Household survey does count such multiple job holders as one employed person. The BLS Household survey includes payroll employees and self-employed persons such as professionals, gig workers/freelancers, contractors, and agricultural workers.

In the Household survey, individuals are counted only once, even if they have more than one job (based on unverified answers across 60K household samples). In the establishment survey, employees working at more than one contractual payroll job are counted separately for each payroll. Thus, often there are divergences between the number of employees and employed person additions in a month between these two BLS surveys (Establishment and Household).

Conclusions:

The August’25 US NFP job data indicates a stagflation-like scenario and was the worst report since December 2020 and contributes to a broader trend of cooling hiring amid economic uncertainties, including tariffs, immigration policy changes, and federal spending cuts. The unemployment rate edged up to 4.3% from 4.2% in August, the highest level since October 2021. Household survey data showed employment rising by 288,000, but the labor force expanded by 436,000, pushing the unemployment rate higher. A broader underemployment measure (U-6), which includes discouraged workers and those in part-time roles for economic reasons, climbed to 8.1%, the highest since October 2021. Over the past three months (June-August), average monthly job growth was just 29,000—the weakest since early 2021. Also, these "larger-than-normal" adjustments/revisions highlight challenges in initial data collection, including lower response rates post-pandemic.

The slowdown in the US job market may be due to Trump's tariffs uncertainty (the highest since the 1930s), immigration crackdowns reducing labor supply, and federal job cuts (e.g., via the Department of Government Efficiency). Private data from ADP corroborated weakness, showing +54,000 private jobs added (below expectations). Job openings fell to multi-year lows in July per JOLTS, and layoff announcements surged 39% month-over-month per Challenger, Gray & Christmas.

This report underscores a labor market at "stall speed," with risks of stagflation (slow growth + rising prices from tariffs). Year-to-date job growth totals 598,000 through August, down sharply from 1.144 million in the same period of 2024. The report strengthens the case for aggressive rate cuts. Markets now price in a near-certain 25-basis-point cut at the September 16-17 FOMC meeting (100% probability), with a 12-16% chance of a 50-basis-point "jumbo" cut. Additional cuts are expected in October and December, potentially totaling 75 basis points by year-end. Fed officials, including Gov. Christopher Waller, have noted openness to larger moves if data worsens further.

Fed sees stagflation in 2026 as it projects lower economic (GDP) growth, higher inflation, and a higher unemployment rate. Overall, the present level of average core inflation should still be above 100 bps from the Fed’s target with an upward risk, while the unemployment rate would be around 4.3% on average for 2025, above 0.8% higher than the aspirational target of 3.5% with an upward bias. Fed may cut 25 bps each in September and December 2025, followed by a long pause again in H1CY26 and then cut another 25 bps in September’26, if average US core CPI inflation rises to around 3.50% in 2026 from 3.00% in 2025 due to Trump’s policies. And the Fed may not cut rates at all in 2026 if US core CPI inflation really surges towards 3.50% average in 2026.

Then, if US core CPI inflation really comes down towards 3.00% and 2.50-2.00% in 2027-2028 (assuming transitory Trumpflation), the Fed may cut 50 bps in 2027 and 25 bps in 2028 for a longer run terminal rate of 3.00% against pre-COVID levels of 2.50%. Fed may keep the longer run neutral/real rate around 1.00% against 0.50% in pre-COVID times, assuming lower US productivity and higher inflation dynamics. If US core CPI inflation does not surge in 2026 towards a 3.50% average rate, then the Fed may cut 50 bps also in 2026, followed by another 50 bps in 2027 for a terminal rate of 3.00% by 2027 (in line with June’25 dot-plots). As a best case, Fed may also cut 75-100 bps in H2CY25 like during H2CY24, as a front-loading due to weak labor/job market and to prevent an all-out job/economic recession (most unlikely).

Fed may try to keep headline unemployment rate between 4.0-4.5% (Orange zone) as it now sees 4.0% as the maximum & sustainable unemployment rate, while trying to bring down the core inflation to 2.0% in a sustainable way by 2027 (mis term) from 3.0-3.5%.

Bottom line: 50 bps Fed rate cut in H2CY25 is now a done deal, but another 50 bps cut in 2026 is not a done deal yet

As base case, Fed may cut 50 bps in H2CY25 (September and December) in line with Hune’25 dot-plots, but another 50 bps rate cut in 2026/H2CY26 may not be certain if US core CPI inflation really surges towards 3.50% average in 2026 from 3.00% in 2025. Fed may cut only 25 bps or even opt for no cuts in 2026 if US unemployment rate continues to hover around 4.30% or edges down to 4.00% on average in 2026 against 3.50% core CPI inflation.  Another option (as best case) is that the Fed may cut 75-100 bps in H2CY26 to front load and opt for no rate cuts in 2026, but it would be most unlikely.

Impact on Market

Normally, the combinations of hotter-than-expected US core inflation data, higher unemployment rate/weak employment situation, and less dovish Fed talks are positive for stimulus addicted Wall Street. But this time, Wall Street futures slid, while Gold jumped on renewed concern about stagflation; Gold zoomed.

Weekly Technical outlook: DJ-30, NQ-100, SPX-500 and Gold

Looking ahead, whatever may be the narrative, technically Dow Future (CMP: 45700) now has to sustain over 46000 for a further rally to 46400-46500 and only sustaining above 46500, may further rally to 47100/47200 in the coming days; otherwise sustaining below 45900/45800-45500/45300-44900, DJ-30 may again fall to 44200/43900-43400/42400 and 41700/41200-40700/39900 in the coming days.

Similarly, NQ-100 Future (23600) now has to sustain over 24100-24200* and further rally to 24300/24450-24700/25000 in the coming days; otherwise, sustaining below 24000/23900-23750/22900, NQ-100 may again fall to 22400/22200-21900/20900-20700/20200 and 19890/18300-17400/16400in the coming days.

Looking ahead, whatever may be the fundamental narrative, technically SPX-500 (CMP: 6550) now has to sustain over 6600 for a further rally to 6800/7000-7500/8300 in the coming days; otherwise, sustaining below 6575/6550-6525/6500, may fall to 6450-6375/6300-6250/6200 and further fall to 6000/5800-5600/5300 in the coming days.

Technically Gold (CMP: 3625) has to sustain over 3650 for a further rally to 3685/3705*-3730/3755*, and even 3775/3805-3825/3855 and 3900/3950-4000/4070 and 4265 in the coming days; otherwise sustaining below 3645-3635, Gold may again fall to 3575/3545-3520/3500 and 3475/3435-3415/3380 and further 3350/3335-3305/3275-3225/3200 and 3175-3115 in the coming days.

 

Disclaimer:  I am an NSE-certified Level-2 market professional (Financial Analyst- Fundamental + Technical) and not a SEBI/SEC-registered investment advisor. The article is purely educational and not a proxy for any trading/investment signal/advice.  I am a professional analyst, signal provider, and content writer with over ten years of experience. All views expressed in the blog are strictly personal and may not align with any organization with, I may be associated.

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