Closing post
Time for a recap.
Evidence is mounting that America’s jobs market slowed over the summer, ahead of tomorrow’s eagerly awaited non-farm payroll report.
Today we have learned:
Private job creations slowed in August, with payrolls rising by just 54,000 last month, according to data provider ADP
Layoffs jumped, with US-based employers announcing 85,979 job cuts last month,
More Americans sought unemployment benefit in the final week of August, with the initial claims total rising by 8,000, to 237,000.
On the ADP payrolls slowdown, Kathy Jones, chief fixed income strategist at Schwab, says:
“The report should solidify the expectations for a rate cut later this month and increase the odds of another cut this year.
However, the drop in bond yields may be limited by the elevated level of inflation and the overall solid pace of GDP growth.”
The latest economic signals from the UK are worrying too:
Calm has returned to the bond markets today, after the sell-off earlier this weeks abated. The yield, or interest rate, on UK 30-year bonds has dipped back to 5.56%, having hit 5.75% yesterday – the highest since 1998.
Electric van demand doubles as UK market shrinks again
Back in the UK, registrations of electric vans have doubled even as the overall market shrinks.
The SMMT has reported that UK demand for new light commercial vehicles shrank by -13.3% in August with 14,365 new vans, pickups and 4x4s joining UK road. Volumes have fallen every month this year, a worrying sign for the economy.
According to the SMMT, new pickup registrations saw the largest percentage drop, down -25.8% to 1,040 units, impacted by recent fiscal changes to reclassify double-cab pickups as cars for benefit-in-kind and capital allowance purposes.
Sales of battery electric van (BEV) models rose by 109.5% year-on-year, to 1,902 units.
Wall Street has opened slightly higher, as traders digest today’s weaker-than-expected private payrolls report.
The Dow Jones Industrial Average has risen by 33 points, or 0.07%, to 45,304 in early trading.
The broader S&P 500 share index is up 0.2%.
The lower-than-expected ADP reading of 54k signals weakening private sector job growth, amplifying concerns about an economic slowdown, says Aaron Hill, chief analyst from FP Markets:
This boosts the likelihood of a dovish Fed policy, putting downward pressure on the US dollar. Lower interest rate expectations reduce the appeal of USD-denominated assets, likely weakening the US dollar against major pairs like EUR/USD and USD/JPY, and pushing the DXY index toward recent lows.
Falling US Treasury yields, a common reaction to soft labor data, further erode USD strength. Historical patterns show similar misses triggering USD declines, and this significant shortfall could drive a notable sell-off in the currency.
US jobless claims total rises
Further evidence that the US jobs market is weakening has just landed.
The number of Americans filing new claims for unemployment support has risen to 237,000, in the last week of August. That’s an increase of 8,000 from the previous week.
Economists had expected a smaller rise, to 230,000. Initial claims are seen as a proxy for job losses, and have been at historically low levels in the last few years.
The Department of Labor also reports that the largest increases in initial claims for the week ending August 23 were in New York (+1,430), Texas (+1,230), Illinois (+509), Missouri (+206), and Hawaii (+119). The largest decreases were in Iowa (-1,235), Virginia (-857), Maryland (-562), Pennsylvania (-482), and Connecticut (-455).
Updated
Today’s (poor) ADP Payroll report is closely watched, ahead of the official US jobs report tomorrow.
Investors are poised for the August non-farm payroll report due in 24 hours time, as last month’s showed a shock drop in employment – and prompted Donald Trump to fire the head of the labor statistics board.
54k ADP (68k expected)
— Sam Ro 📈 (@SamRo) September 4, 2025
Can Trump fire the head of ADP?
Updated
US hiring slowdown confirmed
Just in: Hiring at US companies slowed sharply last month – another sign that America’s jobs market is cooling.
Company payroll operator ADP reports that private sector employment increased by 54,000 jobs in August, barely half the 106,000 jobs created in July.
“The year started with strong job growth, but that momentum has been whipsawed by uncertainty,” said Dr Nela Richardson, chief economist, ADP, adding:
“A variety of things could explain the hiring slowdown, including labor shortages, skittish consumers, and AI disruptions.”
ADP reports that manufacturing employment fell by 7,000 jobs last month, while construction added 16,000 and natural resources/mining payrolls rose by 4,000.
Payrolls across services companies rose by 42,000; here’s a breakdown:
Trade/transportation/utilities -17,000
Information 7,000
Financial activities -2,000
Professional/business services 15,000
Education/health services -12,000
Leisure/hospitality 50,000
Other services 1,000
US company job cuts jump in August
Job cuts at US companies has hit their highest August level since 2020, according to new data from outplacement and coaching firm Challenger, Gray & Christmas.
US-based employers announced 85,979 job cuts last month, which is 39% more than in July and 13% more than in August 2024.
This is another indication that the US labour market cooled over the summer….
August’s total was the highest for the month since 2020 when 115,762 job cuts were recorded. After 2020, it is the highest August total since the Great Recession in 2008, when 88,736 cuts were announced.
Andrew Challenger, senior vice president and labor expert for Challenger, Gray & Christmas, explains:
“After the impact of DOGE on the Federal Government, employers are citing economic and market factors as the driver of layoffs. We’ve also seen a spike in cuts due to operation or store closings and bankruptcies this year compared to last.”
The report also shows that companies have announced 892,362 job cuts so far this year, the highest YTD since 2020 when 1,963,458 were announced. It is up 66% from the 536,421 job cuts announced through the first eight months of last year and is up 17% from the 2024 full year total of 761,358.
The Bank of England is seeking advice on how to enhance the resilience the UK gilt repo market, and avoid throwing more fuel on a market crisis.
The gilt repo market allows banks to borrow money trhough a short-term borrowing arrangement (repurchase agreements, or ‘repo’), using government debt (‘gilts’) as collateral.
The dangers of sudden moves in the gilt market were exposed after Liz Truss’s mini-budget of 2022 – bond prices fell, leading to forced sales for liability-driven investment pensions funds (LDI funds), creating a doom loop.
The BoE is considering various measures that could prevent a meltdown, including potentially creating a central clearing counterparty (CCP) to handle repo deals between banks.
The Bank explains:
The smooth functioning and resilience of government bond markets is fundamental to financial stability and the real economy. Given their role in financing government activity and as a benchmark for the pricing of other financial instruments, such as corporate bonds, government bond markets facilitate the provision of vital services, investment, and sustainable economic growth. Therefore, it is crucial to ensure that these markets are able to continue functioning during periods of stress and absorb, rather than amplify, shocks.
In turn, government bond repo markets are important to the resilience of government bond markets and, hence, to financial stability, given their role in facilitating the flow of cash and gilts across the financial system and as a source of funding for market participants’ leveraged strategies.
Amazon UK sales hit £29bn
Amazon has revealed that UK sales rose to £29bn last year, making it slightly larger than Asda, the UK’s third largest supermarket.
However, the pace of growth at the group, which operates cloud services and other digital systems for businesses alongside its retail arm, slowed to 7.4% in 2024 from 12.5% in the prior year.
The company now has 75,000 UK employees, about half that of Asda, and says it paid £1bn of UK taxes, up from £932m last year. However that includes business rates, corporation tax and national insurance contributions – and the company does not break down the figure.
The government has said it wants to revise the business rates system from next year so that online retail businesses such as Amazon pay more and the burden is eased on high street businesses. However, under its current plans, most large expensive buildings, including hospitals and some department stores and supermarkets will also pay more business rates – alongside the warehouses and offices used by online sellers.
Amazon’s UK Services arm is expected to release its full accounts next week. In 2023, the division paid £18.7m in “current tax” which is understood to have been largely corporation tax. It was the first time since 2020 the division had paid corporation tax.
The company received a £7.8m tax credit in 2022 and a £1.1m credit in 2021 after its investments in infrastructure.
In 2024, Amazon said it had invested £1.6bn in infrastructure in the UK, including new warehouses, but some of the tax breaks on that it enjoyed in prior years have now been unwound.
Goldman: Gold could approach $5,000/oz if Fed independence damaged
The gold price has dipped a little today, away from the record highs set during this week’s bond market turmoil.
Gold is trading at $3,540 per ounce this morning, down 0.5%, having yesterday hit a peak of $3,578.50 per ounce.
Goldman Sach’s baseline forecast is that gold hits $4,000 per ounce by mid-2016.
But in a note today, they predict it could rise much higher if the independence of the Federal Reserve is damaged, leading to higher inflation, lower stock and long-dated bond prices, and an erosion of the dollar’s reserve currency status, pushing more investors into gold.
Goldman’s analysts write:
Should private investors look to diversify more heavily into gold, as have central banks, we see potential upside to gold prices even above our tail risk scenario of $4,500/toz [troy ounce], which itself is already well above our $4,000 mid-2026 baseline, given the very small size of the physical gold ETF market relative to Treasury bonds, at only 1%.
For example, we estimate that if 1% of the privately owned US treasury market were to flow into gold, the gold price would rise to nearly $5,000/toz, assuming everything else constant. As a result, gold remains our highest-conviction long recommendation in the commodities space.
Goldman Sachs expects gold to surge to $4,000 an ounce by mid-2026. If the Fed's credibility gets significantly eroded, GS sees gold nearing $5,000. Gold prices have already doubled in the past three years. https://t.co/N4hfV63WT3 pic.twitter.com/Dyq2bF4hxG
— Lisa Abramowicz (@lisaabramowicz1) September 4, 2025
German institutes cut growth forecasts
We have disappointing economic news from Germany this morning too.
A group of top German economic institutes have trimmed their growth forecasts for 2025 and 2026, citing headwinds from the US trade war.
The Ifo institute now expects gross domestic product to expand by just 0.2% this year, a cut of 0.1 percentage point. Growth is expected to rise to 1.3% in 2026, a drop of 0.2 percentage points from its previous forecast.
The Kiel Institute for the World Economy made similar reductions, cutting its 2025 growth forecast to 0.1% from 0.3% in June. It now sees GDP rising 1.3% in 2026, down from 1.6% previously.
Over in the eurozone, retail sales have dropped again.
Retail sales growth in the euro area fell by 0.5% month-on-month in July, larger than the 0.2% fall expected.
Euro area #RetailTrade down by 0.5% in July 2025 over June 2025, up by 2.2% compared with July 2024 https://t.co/kWbdJ0JyXR pic.twitter.com/kcX7Hwwzik
— EU_Eurostat (@EU_Eurostat) September 4, 2025
Firms cut profit margins and jobs after national insurance rate rise
Two thirds of UK companies cut their proft margins in response to this year’s rise in employment taxes, new Bank of England data shows.
The BoE’s poll of ‘decision makers’ at UK firms has asked how they adjusted to the rise in employers’ national insurance rates, which kicked in at the start of April.
Firms were allowed to select more than one option. 66% of firms reported lowering profit margins, 34% raising prices, 46% lowering employment and 20% paying lower wages than they otherwise would have done, the Bank says.
Construction slump: what the experts say
Overall, the S&P Global UK Construction Purchasing Managers’ Index rose to 45.5 in August, up from 44.3 in July (which was the lowest reading for just over five years).
That’s still below the 50-point mark separating expansion from contraction.
Here’s some expert reaction:
Max Jones, director of infrastructure and construction at Lloyds, says:
“Civil engineering and public infrastructure projects have helped to balance softer demand elsewhere in the market, and there have been some notable examples of commercial projects moving ahead, helping to bring some stability to pipelines.
“Although firms are still facing relatively high materials prices, overall cost pressures have eased compared to earlier in the year, supporting hopes that momentum could build as we enter Autumn.”
Huda As’ad, Accenture’s infrastructure and capital projects lead in the UK and Ireland, says:
“The construction sector has been hit by persistent cost pressures and ongoing operational challenges throughout the year, with housing and civil engineering particularly hard hit.
While recent government initiatives, including the new UK Infrastructure Pipeline and the Great British Energy Act, are shaping a stronger long-term framework - it will take time for benefits to filter through. To navigate uncertainty, the industry should focus on making their supply chains more resilient by adopting modern building methods and digitising operations. The construction sector has the opportunity to power the UK’s economic recovery, but it requires decisive action.”
And here’s Brian Smith, head of cost management at engineering company AECOM:
“An increase in August’s activity, despite remaining below the 50.0 mark, paints a more encouraging picture for the sector. However, even as the pace of decline has eased, firms will be looking for a longer-term stabilisation in new orders before adding capacity to their books.
“In this environment, contractors should keep a tight grip on cash flow and costs, act early if challenges emerge, and remain realistic about risks so they are not caught off guard if market conditions deteriorate. The government’s return from recess will be key as it looks to implement a new 10-year infrastructure plan, backed by £725 billion of public investment.
However, ambition alone won’t be enough. Unlocking projects, accelerating delivery and providing the certainty required for long-term planning will only be possible if the public and private sectors work in partnership to convert investment into tangible outcomes that reshape the UK’s economic and social landscape.”
Updated
Employment across the construction sector has also fallen, today’s PMI report shows, as building firms implement hiring freezes and decide not to replace departing staff,
S&P Global explains:
Employment numbers have fallen throughout 2025 to date and the latest reduction was the fastest since May.
A number of firms commented on efforts to mitigate rising payroll costs by cutting back on recruitment. Subcontractor usage also decreased markedly in August and at one of the fastest rates seen over the past five years.
UK construction firms have been hit by a lack of new projects, S&P Global reports.
That led to a solid reduction in purchasing activity across the construction sector.
UK construction in longest downturn since early 2020
Ouch! Britain’s construction sector is suffering its longest continuous downturn since the early days of the Covid-19 pandemic.
Construction output slumped again in August, according to the latest poll of purchasing managers from data provider S&P Global.
Its construction PMI has found:
Business activity falls for eighth month in a row, but at slower pace than in July
Solid reductions in new work and employment
Optimism drops to its lowest since December 2022
S&P Global says there was a “sustained downturn in UK construction output” in August, led by a “marked reductions in the housing and civil engineering segments”.
Civil engineering was the weakest-performing segment in August, with business activity decreasing at the fastest pace since October 2020. Housebuilding activity also fell, suggesting the government is strugging to hit its target to boost home construction.
Tim Moore, economics director at S&P Global Market Intelligence, said:
“Construction activity has decreased throughout the year-to-date, which is the longest continuous downturn since early-2020. August data signalled only a partial easing in the speed of decline after output fell at the fastest pace for over five years in July.
Sharply reduced levels of housing and civil engineering activity were again the main reasons for a weak overall construction sector performance. Commercial work showed some resilience in August, with the downturn the least marked for three months.
There were some positive signals on the supply side as vendors’ delivery times shortened, subcontractor availability improved and purchasing price inflation hit a ten-month low. However, easing supply conditions mostly reflected subdued demand and a lack of new projects.
Elevated business uncertainty and worries about broader prospects for the UK economy meant that construction sector optimism weakened in August. The proportion of panel members expecting a rise in output over the year ahead was 34%, down from 37% in July and lower than at any time since December 2022.”
UK car sales dip, but Tesla slump ends
Just in: UK car sales fell last month, but the slump in demand for Tesla’s vehicles reversed.
The Society of Motor Manufacturers and Traders has reported that new car registrations fell by 2% in August, to 82,908 units. August is typically the quietest month of the year, due to summer holidays and drivers waiting for new number plates in September.
Sales of battery-powered cars rose by almost 15%, which the SMMT attributes to “model choice, ongoing manufacturer discounts and some limited initial impact from the newly announced Electric Car Grant”. This lifted BEV’s market share to 26.5%, the highest recorded in 2025.
After several months of sliding sales, Tesla enjoyed a 7% rise in registrations in August. Elon Musk’s carmaker sold 3,243 models last month, up from 3,013 a year earlier.
That’s a significant improvement on July, when Tesla sales slumped by 59%.
This may be due to Tesla launching an updated version of its Model Y car earlier this year.
Chinese rival BYD quadruled its UK sales in August, to 1,759 from 438 a year earlier.
Mike Hawes, SMMT chief executive, says:
August was the best month yet this year for EV market share and, while it is often volatile due to low overall volumes, the overall trend is positive. September will be critical, with the new number plate factor typically driving around one in seven new car registrations for the year.
There is now a vast choice of electric models across all segments and many consumers will also, for the first time in three years, benefit from a grant to help them switch to electric. With more models being added to the Government’s Electric Car grant each week, there is now every reason for drivers to make the switch, helping deliver both economic growth and decarbonisation.
Updated
Oil price drops
The price of oil is dropping this morning, on predictions that the Opec+ group could increase production again.
Opec+ are due to meet on Sunday when they will consider whether to agree another increase in output targets.
OPEC+ had already agreed to raise output targets by about 2.2 million barrels per day from April to September, plus a 300,000 bpd quota increase for the United Arab Emirates.
The possibility of a further increase to supply has pushed Brent crude down by around 1% this morning, to below $67 per barrel.
UK 30-year yields are dipping
UK long-term borrowing costs have fallen a little this morning, as the bond market panic eases.
The yield, or interest rate, on 30-year gilts has dipped by two basis points (0.02 percentage points) to 5.58% this morning.
Last night they closed at 5.6%, having hit a 27-year high of 5.75% on Wednesday morning.
Airline shares fall after Jet2 predicts slower earnings growth
Leisure travel group Jet2 has spooked the travel industry this morning, by predicting weaker earning growth than expected.
Jet2 told investors that it expects its earnings, on an EBIT basis, to be towards the lower end of the analysts’ consensus range.
It also cautioned that it has “limited visibility” about prospects for this year, as holidaymakers are making bookings later, meaning it still has much of its winter seat capacity still to sell.
Steve Heapy, Jet2’s chief executive officer, says:
“Although we are currently operating in a difficult market, we have a proven business model, a loyal customer base, a flexible approach to capacity management and of course our multi award-winning customer service.
We believe that these factors provide the foundation for a solid financial result this year and for further profitable growth in the years to come.”
Shares in Jet2 tumbled 23% at the start of trading, and are now dow 14%.
Other airlines are suffering too – easyJet have fallen by 4.2%, while British Airways’ parent company IAG has lost 2.3%.
Updated
European stock markets have opened calmly too.
In London, the FTSE 100 share index is down by just 3 points (-0.04%) at 9174, following some choppy sessions which saw losses on Tuesday and a partial recovery on Wednesday.
Germany’s DAX dipped by 0.27% at the open in Frankfurt.
Updated
Panmure Liberum: UK must show 'firm hand' to keep bond yields under control
Signs of calm in the bond market will be warmly welcomed in the UK Treasury.
The jump in Britain’s bond yields risks widening the ‘black hole’ which Rachel Reeves is expected to fill in the autumn budget scheduled for 26 November.
That could mean either spending cuts or tax rises to persuade the Office for Budget Responsibility that the chancellor is keeping within the fiscal rules.
Simon French, chief economist at Panmure Liberum, arugues that UK fiscal and monetary policymakers must demonstrate “a firm hand on the tiller” in the next few weeks, to help sooth UK gilt yields.
He writes:
Coordination of these policymakers will be key, and we are modestly encouraged by Treasury language subtly shifting to the task of controlling inflation.
Saying it though is the easy bit. Making the tough decisions to enable it is far harder.
The jury is out on whether the UK government - and its backbenchers - have the backbone, and the Gilt market knows it.
French also flags that since the government’s Spring Statement earlier this year, the UK’s ten-year yield has been the highest in the G7, “the longest such outlier run in modern market history”:
That suggests that domestic factors, as well as global concerns, have ben pushing up UK bond yields.
Analyst: "The bond market rout could be over"
There is a sense of calm in European and US markets today, reports Kathleen Brooks, research director at XTB, as the recovery in global bond yields on Wednesday helps sentiment.
Brooks writes:
There are signs that the bond market rout could be over. Global government bond sales have been strong this week and have not been impacted by bond market volatility. Added to this, some governments including the UK’s are talking once more about public sector spending cuts, which may boost demand for Gilts in the short term.
Risks are still looming for the bond market, for example, Monday’s confidence vote in the French government. If the government collapses, then French bonds will be in the spotlight. Ahead today, there is a massive $11bn auction of French government debt. We will be watching this closely to gauge demand and to see if political turmoil impacts demand.
That auction is scheduled for 10am UK time….
Trump asks US supreme court to uphold his tariffs
Uncertainty over Donald Trump’s trade wars are another factor hitting bond prices this week.
Last Friday’s court ruling that Trump’s tariffs are illegal has raised the prospect that the White House might have to refund billions of dollars paid by Americans on imported goods, as well as losing out on future revenues.
As the White House has been, ahem, trumpeting the rising income from tariffs, that would be a blow.
Political party discovers that higher tax rates lead to higher tax revenues. https://t.co/RDc0MzMz2S
— Justin Wolfers (@JustinWolfers) September 3, 2025
The prospect that America might need to borrow even more money to cover for a tariff shortfall could have weighed on bond prices this week, pushing up yields.
Overnight, Trump asked the US Supreme Court to uphold his global tariffs on a fast-track schedule. This means the nine members of the Court will now have the finnal say on whether Trump can raise the US’s effective tariff rate to its highest in around a century.
If the US government loses the case, some of the trade deals struck in recent months could also come unstuck.
Introduction: Relief as Japan's debt auction proceeds smoothly
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
There are signs that calm may be returning to the global bond market, after Tuesday’s sell-off drove government borrowing costs to multi-year highs.
Earlier today, an auction of 30-year Japanese government bonds proceeded smoothly, helping to support Japan’s debt prices.
Encouragingly for Tokyo, demand for its long-term debt held up pretty well – the bid-to-cover ratio, which measures the amount of bids against the amount of debt on offer, was 3.31, only slightly below the 12-month average of 3.38.
This has helped to push down the yields, or interest rates, on Japan’s debt in the bond market – a relief, after long-term yields hit record highs earlier this week.
Hirofumi Suzuki, a strategist at SMBC, explained:
Given the sharp selloff in the 30-year yesterday, short-covering had been underway from the morning session, and the auction ended up passing smoothly.
“That said, political uncertainty in Japan also continues, so upward pressure on Japanese yields is likely to persist.”
Long-term bonds are under pressure due to concerns about the size of government debt, political obstacles to spending cuts, and structurally higher inflation.
Yesterday, the yields on UK and US long-term debt both fell back, bringing some relief after Britain’s 30-year borrowing costs hit the highest level since 1998.
Bond prices recovered after disappointing US job openings data was released, prompting investors to predict faster interest rate cuts. It showed that for the first time in more than four years, there are fewer open jobs in America than there are job seekers.
Jim Reid, market strategist at Deutsche Bank, explains:
The global bond selloff finally paused for breath yesterday, as weak US data meant investors ramped up their expectations for Fed rate cuts this year.
The main catalyst was the JOLTS report for July, which showed that job openings fell to a 10-month low and exacerbated fears about a labour market slowdown.
The number of job openings fell to an estimated 7.18m at the end of July, down from 7.36m the month before.
Investors will be watching the latest employment data from the US, due later today, for further signs that its labour market is cooling.
The agenda
9am BST: UK car sales data for August
9.30am BST: UK construction PMI for August
12.30pm BST: US Challenger job cuts report
1.30pm BST: US jobless claims
1.15pm BST: US ADP private payrolls data
3pm BST: US service sector PMI
