Sharp drop in job growth and higher unemployment point to slowdown in US labor sector

US nonfarm payrolls increased by 73,000 jobs in July, falling well below forecast at 110,000 and against disappointing downwardly revised June’s figure to 14,000 from initial release at 147,000.

Unemployment ticked up to 4.2% last month from 4.1% in June but came in line with expectations

Much slower than expected July’s job growth, sharp revision down of previous month’s numbers and rise in unemployment, warning of a slowdown in the US labor market.

Job growth has slowed amid uncertainty over President Donald Trump’s tariffs, as he announced a list of new tariffs for a number of trading partners, just ahead ahead of Aug 1 trade deal deadline.

The most important monthly report after release of JOLTS job openings which disappointed and ADP private sector payrolls beating expectations, was released just two days after Fed’s monetary policy meeting, in which the central bank left its benchmark rate unchanged at 4.25%-4.50%.

Fed Chair Jerome Powell’s comments after the decision, dented market expectations the central bank would resume policy easing in September.

Powell described the labor market as being in balance because of supply and demand both declining simultaneously, but he acknowledged this dynamic was suggestive of downside risk.

In such conditions, markets have pushed back widely expected September rate cut to October, though many economists believe that the Fed may stay on hold for the rest of the year, on growing risk that tariffs will lift inflation.