Job Prospects Viewed Differently: Previous Revisions Eliminate Recent Advancements and Alter Forecasts by Kiplinger
U.S. Job Market Slows Down Amid Tariff Uncertainty
The U.S. job market showed signs of a slowdown in July 2025, with employers adding only 73,000 jobs, a significant decrease from previous months. This slowdown was particularly evident in the manufacturing sector, which shed 11,000 jobs due to tariff-related uncertainty depressing orders [1][4].
The unemployment rate rose to 4.2%, and the labor force participation rate decreased, signaling a softer job market [1][4]. Economists had anticipated job growth to fall below 100,000 per month, but the slowdown occurred earlier than expected [1].
The manufacturing sector is not the only industry affected. Downward revisions also hit retail, health care, leisure and hospitality, professional and business services, and financial activities [1]. Foreign-born worker employment dropped for the fourth straight month [1].
However, not all sectors are experiencing a downturn. Health care once again contributed its usual robust gains [1].
The Federal Reserve has been closely monitoring the situation, and while it has held interest rates steady, it may consider cuts in the near future. The Fed is considering the impact of tariffs on inflation and wage growth before making a decision [2]. Fed Chair Powell's speech on August 22 will provide insight into the state of the economy and the labor market [1].
Economic analyses estimate that tariffs and foreign retaliation reduce U.S. real GDP growth by about 0.5 percentage points annually in 2025 and 2026 and increase unemployment by 0.3 percentage points this year and 0.7 points in 2026, with nearly 494,000 fewer payroll jobs by the end of 2025 [3]. Consumer prices rose about 1.8% short term due to tariffs, equating to an average income loss around $2,000 per household [3].
The number of workers forced to work part-time because of poor economic conditions rose, and the number of workers who are unemployed for longer periods increased [1]. Wage growth ticked up to a 3.9% annual pace, but is expected to slow to 3.5% by the end of the year [1].
In response, the Federal Reserve paused on raising interest rates in early August 2025, citing economic uncertainty and rising tariffs, but has not ruled out potential interest rate cuts to support the economy if the labor market deteriorates further [4]. The slowdown in job growth and rising unemployment are likely to increase calls for rate cuts to stimulate growth while managing inflation pressures from tariffs [1][4].
In summary, tariffs have so far weakened the U.S. labor market and economy, with rising unemployment, declining job growth, and increased consumer prices. The Federal Reserve is balancing these challenges by pausing rate hikes and considering cuts if needed to stabilize the economy.
[1] Bloomberg News, August 6, 2025. [2] CNBC, August 10, 2025. [3] The Brookings Institution, July 31, 2025. [4] The Wall Street Journal, August 5, 2025.
The slowdown in the U.S. job market, evident in July 2025, affected multiple sectors, including business services, as downward revisions hit financial activities [1]. meantime, the uncertainty caused by tariffs may have contributed to the decrease in job growth [1].
