U.S. Job Growth Slows in July, Falling Below Expectations

Employers across the United States added only 73,000 jobs in July, a significant slowdown compared to previous months and signaling a potential shift in the labor market. This figure fell well below economists' forecasts, which had anticipated a gain of 115,000 jobs, according to a poll by FactSet.

The unemployment rate rose slightly to 4.2%, up from 4.1% in June. Additionally, the Labor Department has revised its earlier estimates for job growth in May and June downward by a combined 258,000 jobs, indicating that hiring in the first half of the year was weaker than previously thought.

When factoring in these downward revisions, the average monthly job gain from May to June was a mere 35,000, a stark contrast to the 123,000 average from January to April. This trend has sparked concern among economists, who believe that the labor market is poised for a further slowdown in the coming months.

Gregory Daco, chief economist at EY-Parthenon, noted that the current economic climate is marked by increasing trade tensions and rising costs, leading businesses to manage labor expenses more carefully. This approach includes reduced hiring, performance-based layoffs, and restrained wage growth.

Despite the overall slowdown, the health care sector experienced the largest gains, adding 55,000 jobs in July. However, the federal workforce continued to shrink, with 12,000 jobs lost in the same period.

Market analysts have attributed the subpar job growth to the recent surge in U.S. tariffs on trading partners. President Trump signed an executive order imposing tariffs on multiple nations, a move that has been linked to economic uncertainty and slower job creation.

Art Hogan, chief market strategist at B. Riley Wealth, stated that the July jobs report is a clear indicator of the impact of trade policies on economic growth, emphasizing that the revisions to the data further support this concern.

Meanwhile, the economic divide between the wealthy and the working class continues to widen. Beth Hammack, president and CEO of the Federal Reserve Bank of Cleveland, highlighted that while the top income earners are thriving, many lower-income individuals are struggling to make ends meet, with reports of people opting for cheaper food options like hot dogs instead of ground beef.

Economists believe that the latest job numbers may encourage the Federal Reserve to cut interest rates at its next meeting in September. However, Fed Chair Jerome Powell has expressed caution, stating that policymakers will wait to see the full impact of the tariffs before making any decisions.

Chris Zaccarelli, chief investment officer at Northlight Asset Management, emphasized the need for the Fed to balance the slowing job market with the still-persistent inflation. According to CME FedWatch, investors currently see a 77% chance of a rate cut at the Fed's meeting on September 16-17.

This report underscores the challenges facing the U.S. labor market and the broader economy as trade tensions and policy decisions continue to shape the economic landscape.