American jobs growth slowed sharply in July and the unemployment rate rose as businesses navigated uncertainty over President Trump’s trade war.
The US added 73,000 seasonally adjusted jobs in July, well below the 110,000 additional jobs expected by economists, while the unemployment rate rose to 4.2 per cent from 4.1 per cent in June, according to the latest figures from the Labor Department.
The manufacturing sector reported its third consecutive month of job losses, with factory jobs down by 11,000 in July, despite Trump’s efforts to use tariffs to encourage companies to manufacture more goods in the US. Federal government layoffs also weighed on payrolls, with the sector losing 12,000 jobs.
Hiring numbers were boosted by the healthcare and social assistance sectors, adding 73,000 jobs.
The Labor Department reported that hiring in May and June was weaker than it previously stated. Employers added 258,000 fewer jobs across those two months than previously forecast.
Job growth has slowed amid uncertainty over where Trump’s tariff levels will eventually settle. On Thursday he imposed steep tariffs on dozens of trading partners before a Friday trade deal deadline, including a 35 per cent duty on many goods from Canada.
• Trump’s tariffs: how did we get here?
The White House’s immigration crackdown and an accelerating rate of people retiring have weighed on workforce supply.
The immigration controls mean the economy now needs to create roughly 100,000 jobs a month to keep up with growth in the working-age population, economists estimated. The decline in the unemployment rate to 4.1 per cent in June was in part due to people dropping out of the workforce.
The Federal Reserve closely follows the monthly jobs reports to influence its policy decisions. On Wednesday the Fed left its benchmark interest rate in the 4.25 per cent to 4.5 per cent range. Jerome Powell, chairman of the Fed, said that the US economy was “in a solid position” and monetary policy was “well positioned” to respond to any downturn in growth or the jobs market.
Friday’s jobs report raised expectations that the Federal Reserve could cut rates in September.
Jeffrey Roach, chief economist for LPL Financial, said: “The downward revisions were the most revealing in this month’s job report.
“As noted earlier, business demand for labour is slowing, adding uncertainty to the growth trajectory for the latter half of this year. Given the weakness, investors will recalibrate rate expectations. This solidifies our view that the Fed could cut rates in September.”
Charlie Ripley, senior investment strategist for Allianz Investment Management, said: “Overall, today’s data signals labour market conditions continue to cool and while the softer conditions don’t warrant a warning signal for investors, it should put market participants including the Fed on notice that economic conditions are shifting.”
However, some economists said they still expected the Fed to keep rates steady for the rest of the year.
Atakan Bakiskan, US economist at Berenberg, said: “Businesses are less eager to hire but layoff rates remain near historical lows. With immigration growth easing, labour supply is expanding at a much slower pace this year. Combined with softening labour demand, this still points to a somewhat balanced job market.
“In our view, the Fed is likely to keep rates on hold — not just in September, but for the remainder of the year.”