Unemployment Edges Up as Fed Signals Rate Cuts Likely
Market Recap for the Week of September 7, 2025
Although it was a shortened trading week, the main event investors were anticipating was Friday’s jobs report. This release has drawn heightened attention recently, as signs of a cooling labor market continue to emerge.
The August report confirmed that trend: the U.S. economy added just 22,000 jobs, while the unemployment rate inched higher from 4.2% to 4.3%. While 4.3% is not historically alarming, it does mark the highest level since 2021.
One factor keeping the increase in unemployment modest is the decline in the labor force participation rate. In other words, fewer people are actively looking for work. This dynamic suggests that the official unemployment rate may actually understate the true level of weakness in the labor market.
Following Friday’s release, market participants interpreted the report as a strong signal that rate cuts in September are all but certain. According to CME FedWatch, there is currently an 89% probability of one rate cut and an 11% probability of two. While rate cuts are often viewed as positive for equities, the context matters. If the Fed is cutting to support an economy at risk of sliding into recession, that’s generally not a bullish backdrop.
“A cooling labor market pushes September rate cuts to near certainty, though economic risks remain.”
Chart of The Week
Our chart of the week, from the JPMorgan Guide to the Markets, provides additional insight into labor market conditions. It highlights JOLTS “quits,” a survey that tracks the number of people who voluntarily leave their jobs, excluding planned retirements.
This measure is valuable because it reflects worker confidence in the labor market. After the pandemic, quits surged as jobs were plentiful and employees felt secure in switching roles. Today, as conditions soften, fewer workers are willing to leave their positions out of concern they may not find another opportunity. Notice also how quits fell sharply during the depths of the 2008 recession—a reminder of how closely this metric tracks labor market sentiment.
The commentary in this blog is for informational purposes only and should not be taken as personalized investment advice
Source: U.S. Department of Labor, J.P. Morgan Asset Management. *JOLTS job openings from February 1974 to November 2000 are J.P. Morgan Asset Management estimates.
Guide to the Markets – U.S. Data are as of September 4, 2025.
