US employers slash hiring as Trump advances a punishing trade agenda
[August 02, 2025] By
PAUL WISEMAN and CHRISTOPHER RUGABER
WASHINGTON (AP) — U.S. hiring is slowing sharply as President Donald
Trump’s erratic and radical trade policies paralyze businesses and raise
doubts about the outlook for the world’s largest economy.
U.S. employers added just 73,000 jobs last month, the Labor Department
reported Friday, well short of the 115,000 expected.
Worse, revisions shaved a stunning 258,000 jobs off May and June
payrolls. And the unemployment rate ticked higher to 4.2% as Americans
dropped out of the labor force and the ranks of the unemployed rose by
221,000.
“A notable deterioration in U.S. labor market conditions appears to be
underway,'' said Scott Anderson, chief U.S. economist at BMO Capital
Markets. ”We have been forecasting this since the tariff and trade war
erupted this spring and more restrictive immigration restrictions were
put in place. Overall, this report highlights the risk of a harder
landing for the labor market.''
Economists have been warning that the rift with every U.S. trading
partner will begin to appear this summer and the Friday jobs report
appeared to sound the bell.
“We’re finally in the eye of the hurricane,” said Daniel Zhao, chief
economist at Glassdoor. “After months of warning signs, the July jobs
report confirms that the slowdown isn’t just approaching—it’s here.”
U.S. markets recoiled at the jobs report and the Dow tumbled more than
600 points Friday.
But President Donald Trump responded to the weak report by calling for
the firing of Erika McEntarfer, the director of the Labor Department's
Bureau of Labor Statistics, which compiles the jobs numbers. “I have
directed my Team to fire this Biden Political Appointee, IMMEDIATELY,”
Trump said on Truth Social. “She will be replaced with someone much more
competent and qualified.”
Trump questioned the big revisions, but they are a standard part of the
monthly jobs report. The Labor Department revises its numbers as more
data comes in. Particularly since COVID-19, businesses have taken longer
to respond to the government's survey on hiring. As more data has come
in later than in the past, the potential for large revisions has
increased.
Revelations in the new data raise questions about the health of the job
market and the economy as Trump pushes forward an unorthodox overhaul of
American trade policy.
Trump has discarded decades of U.S. efforts to lower trade barriers
globally, instead, imposing hefty import taxes — tariffs — on products
from almost every country on earth. Trump believes the levies will bring
manufacturing back to America and raise money to pay for the massive tax
cuts he signed into law July 4.
Mainstream economists warned that the cost of the tariffs will be passed
along to Americans, both businesses and households.
That has begun.
Walmart, Procter & Gamble, Ford, Best Buy, Adidas, Nike, Mattel, Shein,
Temu, Stanley Black & Decker, have all hiked prices due to U.S. tariffs.
Economists at Goldman Sachs estimate that overseas exporters have
absorbed just one-fifth of the rising costs from tariffs, while
Americans and U.S. businesses have picked up the lion's share of the
tab.
Trump has sowed uncertainty in the erratic way he's rolled the tariffs
out — announcing, then suspending them, then coming up with new ones.
Overnight, Trump signed an executive order that set new tariffs on a
wide swath of U.S. trading partners to that go into effect on Aug. 7,
and that comes after a flurry of unexpected tariff-related actions this
week.
“There was a clear, significant, immediate, tariff effect on the labor
market and employment growth essentially stalled, as we were dealing
with so much uncertainty about the outlook for the economy and for
tariffs,” said Blerina Uruci, chief U.S. economist for the brokerage T.
Rowe Price.
Still, Uruci said the data suggests we could be past the worst, as
hiring actually did pick up a bit in July from May and June’s depressed
levels.
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Help wanted sign is displayed at a live music and blues club in
Chicago, Thursday, July 24, 2025. (AP Photo/Nam Y. Huh)
“I’m not overly pessimistic on the U.S. economy based on this morning’s
data,” she said, though she does think that hiring will remain muted in
the coming months as the number of available workers remains limited due
to reduced immigration and an aging population.
“Because of immigration policy, labor supply growth has nearly ground to
a halt,” said Guy Berger, senior fellow at the Burning Glass Institute,
which studies employment trends. “So we’re going to have very weak
employment growth. And we look like southern Europe or Japan.”
Still, with fewer workers available, the economy doesn’t need to
generate many jobs to soak up the unemployed. That could keep the
unemployment rate from climbing much, Berger added.
Trump has sold the tariffs hikes as a way to boost American
manufacturing, but factories cut 11,000 jobs last month after shedding
15,000 in June and 11,000 in May. The federal government, where
employment has been targeted by the Trump administration, lost 12,000
jobs. Jobs in administration and support fell by nearly 20,000.
Healthcare companies added 55,400 jobs last month – accounting for 76%
of the jobs added in July and offering another sign that recent job
gains have been narrowly concentrated.
The department originally reported that state and local governments had
added 64,000 education jobs in June. The revisions Friday slashed those
jobs to less than 10,000.
Those revisions also revealed that the U.S. economy has generated an
average of just 85,000 jobs a month this year, barely half last year's
average of 168,000 and well below an average 400,000 from 2021-2023 as
the economy rebounded from COVID-19 lockups.
The weak jobs data makes it more likely that Trump will get one thing
that he most fervently desires: A cut in short-term interest rates by
the Federal Reserve, which often -- though not always -- can lead to
lower rates for mortgages, car loans, and credit cards.
Fed Chair Jerome Powell and other Fed officials have repeatedly pointed
to a healthy job market as a reason that they could take time to
evaluate how Trump’s tariffs were affecting inflation and the broader
economy. Now that assessment has been undercut and will put more
pressure on the Fed to reduce borrowing costs.
Wall Street investors sharply raised their expectations for a rate cut
at the Fed’s next meeting in September after the report was released.
On Wednesday, the Fed left its key rate unchanged for fifth consecutive
meeting and Powell signaled little urgency to reduce rates anytime soon.
He said the “labor market is solid” with “historically low
unemployment.” But he also acknowledged there is a “downside risk” to
employment stemming from the slow pace of hiring that was evident even
before Friday’s weaker numbers.
The current situation is a sharp reversal from the hiring boom of just
three years ago when desperate employers were handing out signing
bonuses and introducing perks such as Fridays off, fertility benefits
and even pet insurance to recruit and keep workers.
The rate of people quitting their jobs — a sign they’re confident they
can land something better — has fallen from the record heights of 2021
and 2022 and is now weaker than before the pandemic.
Drees Homes, a homebuilder based outside Cincinnati in Fort Mitchell,
Kentucky, has hired about 50 people over the past year, bringing its
workforce to around 950. Pamela Rader, Drees’ vice president for human
resources, it’s “gotten a little bit easier’’ to find workers.
A couple of years ago, Rader said jobseekers were focused on getting
more pay. Now, she said, they emphasize stable employment, a better
work-life balance, and prospects for advancement.
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