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U.S. job market slows as unemployment rises to 4.2%
The U.S. labor market showed clear signs of weakening in July, with the unemployment rate rising to 4.2%, according to official figures released on Friday. This marks a concerning development for the world's largest economy, as job creation has slowed significantly in recent months.
Only 73,000 jobs were added in July—far below analyst expectations. Even more striking, job creation data from May and June were sharply revised downward, with just 19,000 and 14,000 jobs added respectively. These are the lowest monthly increases since the COVID-19 pandemic. Experts noted that the revisions were “well above the usual range,” contrasting sharply with earlier reports suggesting over 120,000 new jobs monthly.
Most of the job gains were limited to a few sectors—primarily health and social services. Meanwhile, jobs in the federal government continued to decline, aligned with the Republican administration’s objective of reducing public spending.
The labor market, which had shown resilience earlier in the year, is now beginning to feel the impact of President Donald Trump’s protectionist policies. Uncertainty surrounding new tariffs on imported goods has led many businesses to delay investment projects, awaiting clearer guidance on future trade costs.
Economists, including Gregory Daco of EY, have highlighted a combination of persistent political uncertainty, trade tensions, and slowing immigration as contributing factors to the downturn in labor market performance. “These pressures are starting to reveal structural cracks,” Daco noted in a recent briefing.
As the U.S. heads into the second half of the year, economists will be closely watching whether the current slowdown is temporary—or the start of a broader contraction in economic momentum.