The U.S. labor market added just 73,000 jobs in July, falling short of expectations and signaling a sharp slowdown in hiring as President Donald Trump’s tariff policies weigh on businesses. According to the Bureau of Labor Statistics, the July figure was below economists’ forecasts of 115,000 new jobs.
US job growth stalls as Trump’s tariffs hit hard
The unemployment rate rose to 4.2%, in line with projections, but the report revealed far deeper concerns through substantial downward revisions to prior months’ data. Job gains in May and June were revised down by a combined 258,000 jobs, with May’s count slashed from 144,000 to 19,000 and June’s total reduced from 147,000 to just 14,000.
These revisions were described by economists as unusually large, raising alarms about the overall health of the labor market. Diane Swonk, chief economist at KPMG, called the revisions “stunning,” noting that the labor market is “stalling out” as businesses face rising input costs and uncertainty from trade policies.
Job growth revisions erase confidence in labor market recovery
The weak report has intensified speculation that the Federal Reserve will lower interest rates at its next policy meeting in September. Futures traders now estimate an 85% chance of a rate cut, up sharply from 38% prior to the report’s release. The weak data eroded confidence in the labor market’s resilience, which Fed officials had previously cited as a reason for holding rates steady.
Hiring in July was heavily concentrated in health care and social assistance, which together accounted for 94% of job gains. The health care sector added 55,000 positions, while social assistance contributed 18,000. Other sectors showed minimal growth, with retail adding 16,000 jobs and financial services gaining 15,000.
Meanwhile, the federal government cut 12,000 jobs, continuing a trend of public sector reductions driven by Trump’s Department of Government Efficiency. Goods-producing industries suffered losses, with manufacturing shedding 11,000 jobs and the construction sector eking out a modest gain of 2,000 jobs.
Immigrant labor force decline adds strain on US hiring
State and local government employment also stagnated, posting a net gain of just 2,000 jobs in July, down sharply from initially reported gains in prior months. The labor force participation rate fell to 62.2%, the lowest since November 2022, reflecting a shrinking workforce as immigration restrictions and demographic factors reduce labor supply.
Long-term unemployment also worsened, with the average duration of joblessness rising to 24.1 weeks, and 1.82 million Americans reported as unemployed for more than 27 weeks. Economists attributed the slowdown to a combination of factors, including Trump’s aggressive tariff policies, restrictive immigration measures, and elevated interest rates.
The foreign-born labor force has declined in recent months, further constraining labor supply and putting upward pressure on wages and inflation. Stock markets reacted sharply to the disappointing data, with the Dow Jones Industrial Average tumbling more than 600 points. Analysts warned that the labor market’s loss of momentum could expose the U.S. economy to a higher risk of recession in the coming months. – By Content Syndication Services.