The labor market just hit a wall. Here's what experts say it means for the economy and your job.

CBS News

04-08-2025

Friday's disappointing July employment report delivered a reality check on the U.S. economy, with the data suggesting the job market is wobbling from the uncertainty of on-again, off-again tariffs.
What was surprising about the Friday report was that employers not only hired fewer people than expected last month, but the government revised its jobs data sharply downward for the prior two months. With the revisions, the U.S. added 19,000 jobs in May and 14,000 in June, reflecting "paltry" employment growth during those months, according to a research note from EY-Parthenon Chief Economist Gregory Daco.
The latest jobs data is shedding new light on the U.S. economy as businesses absorb a multitude of changes — from President Trump's trade deals and fresh tariffs to the new GOP tax law, which provides tax breaks to many Americans but also cuts spending on health care and social programs like food stamps. The jobs data backs up anecdotal evidence from the Federal Reserve's most recent "beige book" — a report that compiles comments from local businesses — that many companies are delaying hiring "until uncertainty diminished."
"Based on what I was hearing from a lot of employers, I kept expecting to see a stagnant jobs report at some point, that's what we got today," Laura Ullrich, Indeed's director of economic research for North America and a former official at the Federal Reserve Bank of Richmond, told CBS MoneyWatch.
She added, "We know the economy has ups and downs, and we're in a pretty stagnant place right now."
In other words, while the labor market isn't seeing massive layoffs, companies also aren't expanding their hiring plans. That can make it difficult for unemployed workers to find new jobs, with the number of people searching for work for more than 27 weeks jumping 11% to 1.8 million last month compared with a year earlier, government data shows.
To be sure, there were pockets of strength in the jobs report, with health care and social assistance adding a combined 73,300 jobs last month, the BLS reported. But many major U.S. employment sectors saw little or no hiring, including leisure and hospitality, transportation and construction, while others — including manufacturing — saw job losses last month, the July data shows.
President Trump on Friday claimed without evidence that the jobs report was manipulated for "political purposes," and fired Bureau of Labor Statistics Commissioner Erika McEntarfer.
He also asserted that the downward revisions were "a major mistake," although the BLS revises its data each month to reflect new information, and the numbers frequently move both up and down.
"The president's belief that the BLS commissioner personally 'produced' the jobs numbers is preposterous and shows a complete misunderstanding of how government statistical agencies operate," noted Heidi Shierholz, the president of the left-leaning Economic Policy Institute and a former chief economist at the Department of Labor, in a post about McEntarfer's firing.
She added, "These data are the product of careful work by hundreds of expert economists, statisticians and civil servants following transparent, well-established methodologies."
Businesses have been expressing hesitation given the uncertain impact of the Trump's tariffs, Federal Reserve Bank of Cleveland president Beth Hammack told CBS News' Kelly O'Grady.
"I'm hearing that uncertainty has really been weighing on businesses," Hammack said of her discussions with business owners in her district, which spans Eastern Kentucky, Ohio, Western Pennsylvania and part of West Virginia. "They've been having a tough time to decide when to invest, how much to invest. Many of them have scaled back plans for investment."
For instance, one franchise owner said that they planned to refurbish their existing locations, rather than open new locations, she added.
Mr. Trump has said tariffs would revive U.S. manufacturing because companies will reshore or open new factories domestically, rather than pay the import duties.
Some Trump officials portrayed the jobs report as a temporary setback as the administration seeks to revive American jobs through its trade policies.
"Obviously there were elements of [the jobs report] that we didn't love, but the trade deals are now in place that cover — including the U.S. — almost 60% of the global economy," Stephen Miran, head of the White House Council of Economic Advisors, told reporters Friday.
With the setting of new tariff rates on Thursday for dozens of nations, uncertainty has also been resolved, he added. "There probably were a lot of firms that, you know, sort of sitting there in May and June saying, 'Hey, you know, this tariff stuff's about to be resolved, this bill you know hopefully becomes law within a month or two — maybe I'm just going to hold off on this investment program.'"
Also on Friday, White House spokesperson Karoline Leavitt issued a statement describing a flourishing economy under President Trump. "Inflation has cooled, wages have increased, unemployment is stable, and the private sector is growing. President Trump's America First agenda has ensured new jobs go to American citizens, instead of illegals or foreign-born workers. The tariffs are raking in billions of dollars to make our country wealthy again," the statement read in part.
The U.S. lost 11,000 manufacturing jobs in July, and the revisions for May and June also show that the sector shed workers during those months. That's notable given Mr. Trump's promise to revive manufacturing jobs, which has led to new agreements from the likes of Johnson & Johnson and Apple to build new plants in the U.S.
But the Trump administration's tariffs have added to the challenges facing the manufacturing sector, especially those producing durable goods such as appliances and automobiles, noted Indeed's Ullrich. For instance, tariffs on imported metals such as steel and aluminum are making it pricier for many manufacturers to create their products, putting pressure on their margins and profits.
The downturn in manufacturing jobs "is hardly surprising," said Scott Paul, president of the trade group the Alliance for American Manufacturing, in an email. "It's another 'treading water' number, which has been the case more often than not for the past few years. But it is concerning that we're now 173,000 jobs below the most recent peak in February 2023," when total nonfarm payroll employment rose to 155.4 million.
It's possible that manufacturing jobs could reverse the trend now that the Trump administration's tariffs and tax policies are settled, Paul added.
Progress on the Trump administration's goal of reshoring American manufacturing jobs may take years, given the cost and time required to build new factories, Ullrich noted. "There are certain products that, even with the tariffs, are still cheaper to make overseas," she added.
"This is not a healthy job market," said Heather Long, chief economist at Navy Federal Credit Union, in an email. "The economy needs certainty soon on tariffs. The longer this tariff whiplash lasts, the more likely this weak hiring environment turns into layoffs."