WASHINGTON (AP) — U.S. hiring is slowing sharply as President Donald Trump’s erratic and radical trade policies paralyze businesses and raise doubts about the outlook for the world’s largest economy.
The Labor Department reported Friday that U.S. employers added just 73,000 jobs last month, well short of the 115,000 forecasters had expected.
Worse, revisions shaved a stunning 258,000 jobs off May and June payrolls. And the unemployment rate ticked up to 4.2% as Americans dropped out of the labor force and the ranks of the unemployed rose by 221,000.
WATCH MORE: Economist analyzes Trump’s trade deals as tariff deadline approaches
“A notable deterioration in U.S. labor market conditions appears to be underway,” said Scott Anderson, chief U.S. economist at BMO Capital Markets. ”We have been forecasting this since the tariff and trade war erupted this Spring and more restrictive immigration restrictions were put in place. Overall, this report highlights the risk of a harder landing for the labor market.”
Economists have been warning that the rift with every U.S. trading partner will begin to appear this summer and the Friday jobs report appeared to sound the bell.
“We’re finally in the eye of the hurricane,” said Daniel Zhao, chief economist at Glassdoor. “After months of warning signs, the July jobs report confirms that the slowdown isn’t just approaching—it’s here.”
U.S. markets recoiled and the jobs report and the Dow tumbled more than 600 points at the opening bell Friday.
The revelations in the new data raise questions about the health of the job market and the economy as President Donald Trump pushes forward with an unorthodox overhaul of American trade policy.
Trump has discarded decades of U.S. policy that had favored fewer barriers and ever-freer trade. Instead, Trump is imposing hefty import taxes — tariffs — on products from almost every country on earth. Trump believes the levies will bring manufacturing back to America and raise money to pay for the massive tax cuts he signed into law July 4.
Mainstream economists say the cost of the tariffs will be passed along to Americans, both businesses and households. That has already begun to happen, with major U.S. companies from Walmart to toothpaste, detergent and toilet paper maker Procter & Gamble announcing price hikes.
Trump has also sowed uncertainty in the erratic way he’s rolled the tariffs out — announcing, then suspending them, then coming up with new ones. Overnight, Trump signed an executive order that set new tariffs on a wide swath of U.S. trading partners to that go into effect on Aug. 7., and that arrived after a flurry of unexpected tariff-related actions this week.
“There was a clear, significant, immediate, tariff effect on the labor market and employment growth essentially stalled, as we were dealing with so much uncertainty about the outlook for the economy and for tariffs,” said Blerina Uruci, chief U.S. economist for the brokerage T. Rowe Price.
Still, Uruci said the data suggests we could be past the worst, as hiring actually did pick up a bit in July from May and June’s depressed levels.
“I’m not overly pessimistic on the U.S. economy based on this morning’s data,” she said, though she does think that hiring will remain muted in the coming months as the number of available workers remains limited due to reduced immigration and an aging population.
Trump has sold the tariffs hikes as a way to boost American manufacturing, but manufacturers cut 11,000 jobs last month after shedding 15,000 in June and 11,000 in May. The federal government, where employment has been targeted by the Trump administration, lost 12,000 jobs. Jobs in administration and support fell by nearly 20,000.
Healthcare companies added 55,400 jobs last month – accounting for 76% of the jobs added in July and offering another sign that recent job gains have been narrowly concentrated.
The department originally reported that state and local governments had added 64,000 jobs in education in June. After the revisions released Friday, that number fell to below 10,000.
The weak jobs data makes it more likely that Trump will get one thing that he most fervently desires: A cut in short-term interest rates by the Federal Reserve, which often — though not always — can lead to lower rates for mortgages, car loans, and credit cards.
Fed Chair Jerome Powell and other Fed officials have repeatedly pointed to a healthy job market as a reason that they could take time to evaluate how Trump’s tariffs were affecting inflation and the broader economy. Now that assessment has been undercut and will put more pressure on the Fed to reduce borrowing costs.
Wall Street investors sharply raised their expectations for a rate cut at the Fed’s next meeting in September after the report was released.
On Wednesday, the Fed left its key rate unchanged for the fifth straight meeting and Powell signaled little urgency to reduce rates anytime soon. He said the “labor market is solid” with “historically low unemployment.” But he also acknowledged there is a “downside risk” to employment stemming from the slow pace of hiring that was evident even before Friday’s weaker numbers.
The current situation is a sharp reversal from the hiring boom of just three years ago when desperate employers were handing out signing bonuses and introducing perks such as Fridays off, fertility benefits and even pet insurance to recruit and keep workers.
Weighing on the job market are the lingering effects of higher interest rates that were used by the Federal Reserve to fight inflation; Trump’s massive import taxes and the costs and uncertainty they are imposing on businesses; and an anticipated drop in foreign workers as the president’s massive deportation plans move forward.
The rate of people quitting their jobs — a sign they’re confident they can land something better — has fallen from the record heights of 2021 and 2022 and is now below where it stood before the pandemic.
We’re not going anywhere.
Stand up for truly independent, trusted news that you can count on!
Donate now
