The U.S. labor market sent fresh warning signals in July, with weaker-than-expected job creation and a slight uptick in unemployment—just as President Donald Trump intensifies pressure on the Federal Reserve over interest rates.
According to data released by the Bureau of Labor Statistics on August 1, the U.S. economy added just 73,000 new jobs in July, well below the 100,000 forecast by Dow Jones—even though the figure slightly exceeded June’s dismal tally of 14,000.
More troubling, job figures for May and June were revised down by a total of 258,000 jobs. June’s count fell from 147,000 to 14,000, and May’s was slashed by 125,000, leaving only 19,000 jobs gained.
The unemployment rate edged up to 4.2%, in line with economists’ expectations. In immediate reaction, the Dow Jones dropped more than 700 points, reflecting investor concerns about a slowing economy.
“This report completely changes the narrative,” said Heather Long, Chief Economist at Navy Federal Credit Union. “The labor market is deteriorating rapidly.”
The weak report has amplified calls for the Federal Reserve to cut interest rates at its September meeting. Futures markets now price in a 75.5% chance of a rate cut, up sharply from 40% just a day earlier, according to CME Group data.
“This is the slowdown we’ve been warning about,” said Luke Tilley, Chief Economist at Wilmington Trust. “Businesses are grappling with a completely different cost environment and are hitting the pause button on hiring.”
Of the limited gains in July, healthcare led the way with 55,000 new jobs, followed by social assistance (+18,000), retail (+16,000), and financial services (+15,000).
On the flip side, federal government employment declined by 12,000, bringing cumulative losses to 84,000 jobs since January. This comes just ahead of the planned cuts to government staffing by Elon Musk’s newly formed Department of Government Efficiency (DOGE).
The professional and business services sector also shed 14,000 jobs, underscoring the broader cooling trend.
Average hourly earnings rose 0.3% from June, matching expectations. Year-over-year, wages increased 3.9%, slightly above forecasts.
“The report highlights a slow but steady labor market cooldown,” said Ger Doyle, North America President at Manpower Group. “While not yet a crisis, hiring momentum is clearly fading, and pressure is building.”
The disappointing data comes as businesses grow increasingly hesitant to hire amid rising tariffs and unresolved trade negotiations. Meanwhile, President Trump has repeatedly demanded aggressive rate cuts from the Fed.
Despite those demands, the Fed held rates steady at 4.25%–4.50% on July 31, unchanged since December last year. Trump responded with fury on Truth Social, attacking Fed Chair Jerome Powell in all caps:
“MR. ‘TOO LATE’ POWELL, A STUBBORN FOOL, MUST CUT RATES IMMEDIATELY. IF HE REFUSES, THE COMMITTEE SHOULD REMOVE HIM!”
Later, Trump doubled down, calling Powell a “disaster” following the release of the jobs report.
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