Job market in the U.S. slows down following substantial job losses among government and foreign workers
The US job market experienced a slowdown in July 2025, with the economy adding just 73,000 jobs, significantly below the forecast of 110,000 and well under the previous months' numbers after large downward revisions.
This cooling labor market reflects weaker hiring momentum, rising unemployment, and a more cautious business environment partly influenced by policy uncertainty, including tariffs and immigration issues. The employment level of foreign-born workers has dropped by about 1 million since January, while the number of US-born workers jumped by about 2.5 million over the same period.
The July jobs report drastically revised down the gains made in the two previous months. Payrolls for June were slashed to 14,000 from the 147,000 originally reported, the fewest in nearly five years. The May total was cut by 125,000 to a gain of 19,000 jobs.
Earnings have increased 3.9% over the past 12 months, outpacing inflation at 2.4%. Average hourly earnings for nonfarm payroll employees rose by 12 cents to $36.44 in July, with hiring in July continuing to increase in health care and social assistance.
The cooling labor market has important implications for the Federal Reserve's interest rate decisions. The weaker-than-expected jobs data challenged the Fed's previous "wait and see" stance on raising rates further. As a result, market expectations shifted dramatically, with bond markets pricing in about an 80% chance of an interest rate cut as soon as September 2025.
Fed Governors Christopher Waller and Michelle Bowman had voted against Powell's "wait and see" approach, and on Friday, Trump called on the Federal Reserve Board to "assume control" if Fed Chair Jerome Powell does not slash rates soon. Both officials on Friday warned of risks to the economy and called for an immediate quarter-percentage-point reduction.
The labor market is weakening at a time when tariffs are starting to boost inflation. The slowdown in employment growth, caused by cautious business hiring amid trade and policy uncertainties, has increased the likelihood that the Federal Reserve will reduce interest rates in upcoming meetings to stimulate economic activity.
Sources: 1. Economic Report 2. Federal Reserve Report 3. White House Statement
- The slowdown in the US job market, coupled with rising inflation due to tariffs, could lead to discussions about the state of the economy in general-news and political media.
- The weaker-than-expected jobs data and the subsequent shift in market expectations toward a possible interest rate cut have far-reaching implications for both finance and business sectors.
- The falling employment level of foreign-born workers and the simultaneous increase in US-born workers might trigger debates about immigration policies in various media outlets, particularly those focusing on politics and society.
