Why the U.S. job market has soured

The U.S. job market has been showing signs of a gradual weakening. But new federal data issued Friday suggests it may have hit a long-awaited wall.

“We’re finally in the eye of the hurricane,” Daniel Zhao, chief economist at career site Glassdoor, wrote in a note.

“After months of warning signs, the July jobs report confirms that the slowdown isn’t just approaching — it’s here,” he wrote.

Employers added just 73,000 jobs in July, the Bureau of Labor Statistics reported Friday. That tally is less than expected.

Economists generally think the U.S. economy needs to add roughly 80,000 to 100,000 jobs per month to keep up with population growth, said Laura Ullrich, director of economic research for North America at job site Indeed.

The July figure suggests the job market isn’t keeping pace with population growth — and is therefore contracting, she said.

Even more concerning than the July numbers: The job growth figures for May and June were much weaker than initially thought, economists said.

The BLS revised the job growth figures for those months sharply downward, to 19,000 jobs added in May (down from an initial 144,000) and 14,000 in June (from 147,000).

All told, employers added 258,000 fewer jobs than initially thought.

Such monthly revisions are typical as the BLS collects additional data from businesses and government agencies, but these adjustments were unusually large, economists said.

It’s unclear why, they said.

“Really, it just shows a very soft job market,” Ullrich said. “It’s not disastrous. Still, those are very weak job numbers,” and not something one would expect in a strong economy, she said.

The numbers could be revised again in August, economists said.

Job growth has averaged 35,000 in the past three months, when accounting for the revised data. By contrast, job growth averaged 111,000 per month in the first three months of 2025.

New jobs have also largely been concentrated in the health care and social assistance sectors, meaning opportunities haven’t been broad-based, economists said.

The data “does tell a completely different story about the job market than what we were originally thinking,” Glassdoor’s Zhao said in an interview.

“We had been under the impression the job market was holding up surprisingly resiliently against economic headwinds like tariffs,” he said.

More from Personal Finance:
Emergency funds are ‘security blanket’ for 401(k) savings
Trump resumes interest accrual on student loans
Senate introduces bill for tariff rebate checks

President Donald Trump announced a spate of new tariffs on Thursday, putting fresh import duties on several trading partners ranging from 10% to 41%.

Tariffs are taxes that U.S. companies pay on items they import.

Tariffs, when kept in place for the long term, generally raise prices for consumers and pressure profits for many businesses by raising their input costs, economists said. Additionally, Trump’s on-again-off-again approach to tariffs creates uncertainty for businesses, leading many to pull back on hiring, economists said.

The national hiring rate is around its lowest since 2014, outside of the early days of the Covid-19 pandemic.

“It’s hard for people to make a decision or change in the face of so much uncertainty,” Ullrich said.

Tariff policy compounds other headwinds, such as immigration policy that has reduced the amount of available workers, cuts to the federal workforce and government spending, and higher interest rates, Zhao said.

There are other concerning signs in the U.S. job market, economists said.

For example, the labor force participation rate fell to its lowest level since 2022, Thomas Ryan, North America economist at Capital Economics, wrote in a note Friday.

This is “potentially further evidence of President Trump’s immigration crackdown keeping undocumented migrants away from the labour market even though they remain in the country,” he wrote.

The unemployment rate also rose to 4.2% in July, up from 4.1% in June, the BLS reported.

The share of unemployed Americans who are long-term unemployed — meaning they’ve been out of work for more than six months — has increased to nearly 25% from 21.6% since July 2024, the BLS said.

One silver lining for workers: Layoffs remain near historical lows.

However, an environment of low layoffs, hiring and quitting creates challenges for job seekers.

“There’s a high degree of stagnation right now,” Ullrich said. “There’s not a lot of movement in and out of jobs.”