The job market weakened sharply during the late spring and early summer as President Trump's tariffs began to take effect.
U.S. employers added just 73,000 jobs in July, according to a report Friday from the Labor Department, while job gains for May and June were largely erased. The unemployment rate inched up to 4.2%.
Health care was one of the few sectors with solid job growth last month. The federal government shed 12,000 jobs in July and has lost some 84,000 workers since the beginning of the year. Tens of thousands of additional federal workers have taken buyouts but are still counted as employed through the end of September.
Tariff uncertainty hits manufacturing
Factories shed 11,000 jobs in July. Domestic manufacturers are supposed to be the beneficiaries of the president's trade policies. But factory managers complain that uncertainty over import taxes has depressed orders and other activity. The federal government has been charging a 10% tax on nearly everything the U.S. imports since April, and higher tariffs are set to take effect on many goods next week.
The unemployment rate rose in July even as nearly 40,000 people dropped out of the workforce. The share of adults who are working or looking for work has fallen by half a percent in the last year.
The weakness in the job market is likely to amplify calls for the Federal Reserve to lower interest rates. The central bank held rates steady earlier this week, out of concern that rising tariffs would put more upward pressure on prices.
Despite the slowdown in hiring, wages continue to climb. Average wages in July were up 3.9% from a year ago, which is likely more than enough to outpace inflation.
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