The U.S. economy added 73,000 jobs in July, falling short of economist expectations for 100,000 new positions, according to the Bureau of Labor Statistics employment report released Friday morning.
The unemployment rate increased to 4.2% from 4.1% in June, matching economist forecasts. The report also included significant downward revisions to previous months’ job creation numbers.
Major Revisions to Previous Months
The Labor Department revised June’s job creation down sharply, from an initially reported 147,000 to just 14,000. May’s employment gains were also cut substantially, from 144,000 to 19,000. Combined, the revisions reduced previous job creation estimates by 258,000 positions.
Labor force participation dropped to 62.2%, the lowest level in nearly three years, according to the BLS data.
Healthcare led job creation with 55,000 new positions, followed by social assistance with 18,000 jobs. Government employment, which had driven growth in recent months, showed minimal change in July.
Manufacturing employment remained essentially flat, with little net change since January, despite administration promises of significant growth in the sector.
Market and Fed Response
Stock market futures fell following the report’s release, while Treasury yields declined sharply. The weak employment data increases expectations that the Federal Reserve may cut interest rates at its September meeting.
The Fed held its benchmark rate steady at 4.25% to 4.5% at this week’s policy meeting, with Chair Jerome Powell citing continued uncertainty about economic conditions. However, two Fed governors dissented from the decision, favoring immediate rate cuts.
Market pricing now shows approximately a 63% probability of a rate cut in September, up from previous expectations.
Economic Context
The employment report comes amid ongoing uncertainty about the Trump administration’s tariff policies. Economists have noted that trade policy uncertainty has contributed to business caution in hiring decisions.
Recent analysis from Federal Reserve researchers found that previous tariff implementations resulted in net manufacturing job losses, with modest gains in protected industries offset by higher input costs and retaliatory measures.
Looking Ahead
The next Federal Reserve meeting is scheduled for September 17-18. Additional economic data, including August employment figures and inflation measures, will likely influence the central bank’s decision on interest rates.
Job cut announcements tracked by Challenger, Gray & Christmas showed 62,075 layoffs announced in July, up 29% from June, with companies citing tariff uncertainty and federal budget cuts as contributing factors.
The report represents the first major economic indicator since the administration’s August 1 deadline for implementing additional trade measures, providing insight into labor market conditions as policy decisions continue to evolve.
