The U.S. labor market was substantially weaker in the spring and early summer, according to a report Friday from the Labor Department. Employers added far fewer jobs than initially reported.
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The job market weakened sharply during the late spring and early summer as President Trump’s tariffs began to take effect.
U.S. employers added just 73,000 jobs in July, according to a report Friday from the Labor Department, while job gains for May and June were largely erased. The unemployment rate inched up to 4.2%.
Health care was one of the few sectors with solid job growth last month. The federal government shed 12,000 jobs in July and has lost some 84,000 workers since the beginning of the year. Tens of thousands of additional federal workers have taken buyouts but are still counted as employed through the end of September.
Tariff uncertainty hits manufacturing
Factories shed 11,000 jobs in July. Domestic manufacturers are supposed to be the beneficiaries of the president’s trade policies. But factory managers complain that uncertainty over import taxes has depressed orders and other activity. The federal government has been charging a 10% tax on nearly everything the U.S. imports since April, and higher tariffs are set to take effect on many goods next week.
“These tariff wars are beginning to wear us out,” one anonymous factory manager said in a survey released Friday by the Institute for Supply Management. “There is zero clarity about the future, and it’s been a difficult few months trying to figure out where everything is going to land and the impact on our business. So far, tremendous and unexpected costs have been incurred.”
The unemployment rate rose in July even as nearly 40,000 people dropped out of the workforce. The share of adults who are working or looking for work has fallen by half a percent in the last year.
The share of immigrants in the workforce has fallen even more sharply, which could be making it harder for employers to fill the jobs they’d like to.
“I think it’s mostly a labor supply story,” says Jed Kolko, a senior fellow at the Peterson Institute for International Economics. “When you look sector by sector, the big slowdown in employment this year is in, first of all federal government employment, of course, but also in some sectors that are particularly reliant on immigrants such as construction, home health aides and accommodation and hospitality.”
The weakness in the job market is likely to amplify calls for the Federal Reserve to lower interest rates. The central bank held rates steady earlier this week, out of concern that rising tariffs would put more upward pressure on prices.
Despite the slowdown in hiring, wages continue to climb. Average wages in July were up 3.9% from a year ago, which is likely more than enough to outpace inflation.
