Employers added just 73,000 jobs in July, sharply below expectations and the slowest pace this year, in a signal that economic uncertainty is weighing heavily on hiring decisions.
The Labour Department’s report released Friday also revised down job gains from the prior two months by a staggering 258,000 positions, suggesting the labour market has been softer than previously understood.
The unemployment rate edged up to 4.2%, from 4.1% in June.
While job growth remains positive, the tepid numbers underscore a significant shift in business sentiment, as firms contend with volatile trade policies, immigration constraints, and signs of slowing demand.
“I think we’re looking at a labor market that’s not absolutely falling off a cliff, but it’s getting materially weaker,” said Oliver Allen, a senior US economist at Pantheon Macroeconomics, in a NYT report.
Tariffs and immigration policy fuel uncertainty around hiring
One of the key factors dampening hiring appetite is the unpredictability surrounding US trade policy.
The Trump administration is set to implement higher tariffs on a broad swath of imports starting August 7, with negotiations ongoing with several trade partners.
Businesses, economists say, are reluctant to expand or hire in the face of such instability.
“It’s hard to pull the trigger on hiring when you’re uncertain about where tariffs are going to land,” said Diane Swonk, the chief economist at KPMG. “It’s the uncertainty that causes the paralysis.”
Immigration-related restrictions and efforts to increase deportations have also strained sectors that depend on foreign-born workers.
Economists warn these policies could exacerbate labor shortages and disrupt industries like agriculture, construction, and hospitality.
Fed holds steady as Trump pressures for rate cuts
The labor market report comes two days after the Federal Reserve opted to keep interest rates unchanged, maintaining a cautious stance despite growing political pressure.
President Donald Trump, in a characteristically fiery post on Truth Social, lashed out at Fed Chair Jerome Powell for not lowering rates, calling him a “stubborn moron” and urging the central bank’s board to override him.
“Jerome ‘Too Late’ Powell… must substantially lower interest rates, NOW,” Trump wrote, adding that the Fed “should assume control” if Powell refuses to act.
Though the Fed has signalled it is not yet ready to cut rates, two of its board members dissented, arguing that weakening labour conditions warranted preemptive easing.
Christopher J. Waller and Michelle W. Bowman called for a rate cut in July, warning that waiting could lead to more aggressive policy moves later.
“With underlying inflation near target and the upside risks to inflation limited, we should not wait until the labour market deteriorates before we cut the policy rate,” Waller said in a statement on Friday.
He is widely viewed as a potential successor to Powell when his term expires next year.
Bowman, who was nominated by Trump to become vice-chair for supervision, echoed the sentiment, saying a July rate cut would have “proactively hedged against a further weakening in the economy.”
Top-line numbers mask soft undercurrent
Despite concerns about the labor market’s direction, overall economic indicators remain mixed.
Gross domestic product expanded at a 3% annualized rate in the second quarter, outpacing expectations.
However, much of that growth stemmed from businesses front-loading imports ahead of tariff deadlines. Underlying demand indicators, including consumer spending, remained muted.
Job growth averaged 168,000 per month last year, far higher than recent figures.
As interest rates remain elevated and trade disputes drag on, economists caution that the labor market could weaken further in the coming months.
The July report, while not catastrophic, reinforces concerns that the economy is entering a more fragile phase.
If hiring continues to slow, the Fed may face mounting pressure—from both the data and the White House—to act sooner rather than later.
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