US Job Growth Stalls Amidst Trump’s Tariff Volatility, Raising Recession Fears
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Washington D.C. - The United States labor market has shown a meaningful slowdown in job creation, with economists pointing to President Donald Trump’s volatile trade and immigration policies as the primary drivers. The latest figures from the Department of Labor reveal a stark deceleration in hiring, prompting concerns about the broader economic outlook and increasing pressure on the Federal Reserve to consider interest rate cuts.
Labor Market Weakens Sharply
In the latest report, the United States added a mere 73,000 jobs last month, a figure substantially lower than anticipated. Concurrently, the unemployment rate ticked up to 4.2% from 4.1%. The revisions to previous months’ data were even more alarming: hiring numbers for May were slashed from 144,000 to 19,000, and the June figure was revised down from 147,000 to 14,000. Thes figures represent a notable decline compared to job creation levels in recent years, particularly in the context of the pandemic-induced job losses.
Tariffs and Uncertainty Hamper Hiring
The employment data underscores the challenges facing the crucial labor market. businesses are adopting a cautious approach to hiring and investment, struggling to navigate the impact of President Trump’s sweeping and frequently changing tariffs implemented throughout the year. The escalating tariff levels, imposed on imports from various countries and specific sectors like steel, aluminum, and automobiles, have led to increased business costs for many firms. Some companies are now passing these higher costs onto consumers, perhaps dampening demand.
“The economy needs certainty soon on tariffs,” stated Heather Long, chief economist at the Navy Federal Credit Union. “The longer this tariff whiplash lasts, the more likely this weak hiring environment turns into layoffs.”
Pressure Mounts on the Federal Reserve
The weakening employment figures place additional pressure on the Federal Reserve as it deliberates the optimal timing for potential interest rate cuts. the central bank’s recent decision to keep rates unchanged has drawn criticism from some officials who believe that maintaining the current stance risks further economic damage.
fed Vice Chair for Supervision Michelle Bowman and Governor Christopher waller, who dissented in the latest vote, argued in separate statements that the inflationary effects of tariffs are temporary. They emphasized the need for the bank to focus on fortifying the economy to prevent further deterioration in the labor market.
“Putting off an interest rate cut could result in a deterioration in the labor market and a further slowing in economic growth,” Ms. Bowman cautioned.
Firing of BLS Head Sparks Controversy
The release of the subdued jobs report comes amidst controversy surrounding the dismissal of the head of the Bureau of Labor statistics (BLS). William Beach, who previously held the position, warned that the firing “sets a hazardous precedent and undermines the statistical mission of the bureau.”
The National Association for business Economics condemned the dismissal, attributing the large revisions in jobs numbers not to manipulation but to “the dwindling resources afforded to statistical agencies.”
Larry Summers, former US Treasury secretary, criticized the move, stating, “Firing the head of a key government agency because you don’t like the numbers they report, which come from surveys using long established procedures, is what happens in authoritarian countries, not democratic ones.”
Ms. Long described the latest jobs report as a “gamechanger,” noting that “the labor market is deteriorating quickly.” She highlighted that 75% of the job growth in July was concentrated in the healthcare sector, indicating a lack of broad-based economic expansion.
The situation remains fluid, with president Trump ordering the reimposition of steeper tariffs on numerous economies, set to take effect in a week. This continued uncertainty surrounding trade policy is expected to keep businesses on edge, potentially prolonging the period of weak hiring and increasing the risk of broader economic contraction. A sharp weakening in the labor market could indeed push the Federal Reserve toward cutting interest rates sooner to bolster the economy.
