The U.S. economy created just 73,000 new jobs in July—a miss of enormous proportions. This disappointing growth highlights the increasing challenges facing the labor market as uncertainty looms over trade policies and economic performance. Federal employment has decreased by 84,000 since losing its January high. In July, the damage was limited to 12,000 federal jobs on net.
The slower-than-expected job growth comes as the economy faces some major headwinds. Further compounding these problems was an economy that grew at a weak 1.2% rate during the first half of the year. This is a drop from the more robust 2.5% average growth rate seen in 2024. Further, previous job numbers have been cut by an astounding amount. May’s job numbers took a historic nosedive—from 144,000 to just 19,000. Prior months figures were revised down, most significantly the drop from June’s 147,000 to a mere 14,000. These changes represent a cumulative drop of 258,000 jobs in the last two months.
Experts express concern over these trends. Michelle W. Bowman noted that the labor market “has become less dynamic and shows increasing signs of fragility.” She added that current conditions “could result in a deterioration in the labor market and a further slowing in economic growth.” These comments highlight concerns that continued stagnation may result in more drastic economic consequences.
The Federal Reserve has been alerted to these developments as well. And in light of that disappointing employment data, the central bank still cut rates at their most recent meeting. Jerome Powell, the Fed Chair, stated, “Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen.” This understandably conservative posture is indicative of the uncertainty that exists with the continued trade war and its effects on the economy.
Exact numbers have not been made public, and in recent months that three-month average employment gain with the help of some other factors has crumple. Given the aforementioned trend, it becomes imperative to understand the resilience of the job market going forward. U.S. gross domestic product (GDP) growth rate for the last quarter was 3%. In a time of lackluster economic measures, this is some really good news and brightens an otherwise gloomy economic picture.
Christopher Waller, another leading Federal Reserve policymaker, highlighted the importance of taking a measured approach to interest rate decisions. He said, “I see no reason that we should hold the policy rate at its current level and risk a sudden decline in the labor market.” His remarks echo the increasing alarm from policymakers over the loss of middle-class jobs and the consequences of this for the health of our economy.
What’s worse is that federal employment is on the decline, and job creation has completely stalled. Analysts are looking toward upcoming economic data to figure out whether these trends are a symptom of an underlying economic malaise in the U.S. labor market. This cocktail of trade uncertainty and barely-there job growth could test the Federal Reserve’s resolve to keep the economy on an even keel.