US Job Growth Slows Sharply, Unemployment Rate Surges
The U.S. labor market showed clear signs of fatigue in July, with job creation slowing significantly and previous months' gains revised sharply downward, a signal that the broader economy may be losing steam faster than anticipated.
According to data released Friday by the U.S. Bureau of Labor Statistics (BLS), nonfarm payrolls increased by just 73,000 last month, far below economists' expectations. Additionally, the employment figures for May and June were revised down by a combined 260,000 jobs, underscoring the weakening trend. The unemployment rate rose to 4.2%, up from 4.0% in June.
The slowdown suggests that the once-resilient U.S. labor market is now facing more than just cyclical headwinds. Hiring has slowed across key sectors, including manufacturing, professional services, and government. Local public education, in particular, saw substantial downward revisions.
Private-sector hiring showed some recovery in July, mainly due to gains in health care and social assistance, but it was not enough to offset broader softness.
'This isn't just a moderation anymore,' said one senior labor economist. 'It's a clear signal that both employers and workers are feeling the strain of an economy losing momentum.'
At the same time, wage growth has stalled, compounding challenges for American households already grappling with the lingering effects of high prices and rising borrowing costs.
The report comes at the end of a week filled with weaker-than-expected data on consumer spending, inflation progress, and business activity, all reinforcing the Federal Reserve's decision to hold interest rates steady at its latest policy meeting. However, the internal divide among policymakers appears to be widening.
Despite Friday's data, Fed Chair Jerome Powell insisted earlier this week that the labor market remains 'strong,' arguing that inflationary risks persist, especially following the latest tariff announcements from President Donald Trump's administration.
Still, markets reacted negatively to the jobs report: U.S. stock futures remained lower, while Treasury yields and the dollar both fell. Investors are now increasingly betting that the Fed could pivot toward rate cuts as early as the fourth quarter, should labor and inflation trends continue in this direction.
The next Federal Reserve meeting is scheduled for September, by which time officials will have access to another jobs report and a new round of inflation data. Those indicators may prove decisive in shaping the central bank's next steps.
Meanwhile, concerns are growing that slower hiring could feed into reduced consumer spending, further dragging on GDP growth in the second half of 2025.
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