The U.S. labor market lost steam in July 2025, as employers added only 73,000 jobs significantly below economists’ expectations according to the latest jobs report from the Bureau of Labor Statistics (BLS). The unemployment rate ticked up slightly to 4.2%, raising fresh concerns about the resilience of the job market amid ongoing economic uncertainty.
Job gains in recent months were also revised downward by a staggering 258,000 positions, indicating that the labor market has been slowing more than previously thought. Experts attribute the weaker data to high interest rates, federal government job cuts, and policy uncertainty around tariffs and immigration.
Health Care Leads Jobs Report Growth as Other Sectors Struggle
The health care industry continued to be a bright spot, with most of the new jobs in July coming from hospitals and outpatient care facilities. However, other key sectors lagged:
- Government: Lost 12,000 jobs in July, bringing total federal job losses in 2025 to 84,000.
- Manufacturing: Shed 11,000 jobs in July, marking the third consecutive month of declines.
President Trump’s aggressive trade and immigration policies are believed to be contributing to the slowdown, with rising tariffs driving up the cost of manufacturing and tighter immigration rules affecting labor availability.
Wage Growth Holds Steady
Despite the weaker hiring data, average hourly earnings rose 0.3% in July and are up 3.9% from a year earlier—suggesting that workers are still seeing gains, albeit modest ones.
Outlook: More Headwinds Ahead?
With higher tariffs set to take effect in early August and immigration enforcement tightening, economists warn of additional strain on the job market. Business leaders remain cautious, holding off on hiring and expansion plans due to policy instability.
“It’s hard to pull the trigger on hiring when you’re uncertain about where tariffs are going to land,” said Diane Swonk, chief economist at KPMG.
The Federal Reserve recently opted to keep interest rates unchanged, signaling a cautious approach amid mixed economic signals. While the labor market hasn’t collapsed, it appears to be on shakier ground than it was at the start of the year.
