Contentious July Jobs Report Signals Sharp Slowdown in U.S. Economy
August 5, 2025 – The U.S. economy added just 73,000 jobs in July 2025, far below the Dow Jones consensus estimate of 100,000, according to the Bureau of Labor Statistics (BLS). The report, released on August 1, also included dramatic downward revisions for May and June, slashing a combined 258,000 jobs from prior estimates—May’s job gains dropped from 144,000 to 19,000, and June’s from 147,000 to 14,000. This brings the three-month average to a mere 35,000 jobs, a stark contrast to the 123,000 monthly average earlier in the year. The unemployment rate ticked up to 4.2%, signaling a labor market cooling faster than anticipated.
The report has sparked heated debate, with President Donald Trump denouncing the numbers as “FAKED” and “RIGGED” on Truth Social, leading to the immediate firing of BLS Commissioner Erika McEntarfer. Trump’s economic team, however, remains optimistic, with White House economist Kevin Hassett acknowledging the concerning revisions but pointing to broader economic strengths and the anticipated impact of the One Big Beautiful Bill Act.
Economists attribute the slowdown to multiple factors, including Trump’s aggressive tariff policies, which have raised import costs and created uncertainty for businesses. Tariffs, now at their highest since the 1930s, are driving up consumer prices, with inflation showing signs of reacceleration in June. Reduced immigration and deportations have also tightened labor supply, particularly in industries like construction, manufacturing, and hospitality, which lost 11,000, gained 2,000, and added 5,000 jobs, respectively. Health care and social assistance accounted for 94% of July’s gains, highlighting a lack of broad-based growth.
The weak report has intensified pressure on the Federal Reserve, which held interest rates steady at 4.25%-4.50% in July. Fed Chair Jerome Powell cited a previously “solid” job market but noted the need to monitor tariff-driven inflation. With the unemployment rate rising and job growth stalling, markets now see a 75%-77% chance of a rate cut in September, though some economists warn of stagflation risks—slow growth paired with persistent inflation.
Financial markets reacted sharply, with the Dow dropping over 600 points and the S&P 500 and Nasdaq falling 1.7% and 2%, respectively, on August 1. Factory orders also fell 4.8%, and the Conference Board’s employment trends index hit its lowest since October 2024, further clouding the economic outlook. Goldman Sachs projects GDP growth at just 1% for the second half of 2025, down from a 3% annualized pace in Q2, which was inflated by a temporary import reversal.
While some, like T. Rowe Price’s Blerina Uruci, suggest hiring may stabilize, others, including Moody’s Analytics’ Mark Zandi, warn the economy is “on the precipice of recession.” The data underscores a labor market under strain, with long-term unemployment rising to 25% of the jobless and average unemployment duration hitting 24.1 weeks, the highest since April 2022. As businesses grapple with tariff costs and reduced labor supply, the path forward remains uncertain, with recession risks elevated but not yet certain.
Sources: CNBC, The New York Times, PBS News, Reuters, The Washington Post, CNN Business