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What Slower Job Growth and Rising Tariffs Mean for American Workers

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The July jobs report delivered a sobering message: the U.S. labor market is slowing sharply just as higher tariffs are starting to take effect. Employers added only 73,000 jobs last month, far below forecasts that had anticipated at least 100,000 new positions. This figure, coupled with a slight rise in unemployment to 4.2%, reflects a tangible shift in labor market momentum, with analysts noting a pronounced downtrend over recent months.

Not only was July weak, but downward revisions to May and June show that those months were even worse than first reported. Payroll growth has averaged just 35,000 jobs a month during the past quarter—the slowest expansion since the pandemic. Sectors hit hardest include professional services, manufacturing, and government, while job gains concentrated in areas like health care and retail aren’t easily accessible to displaced workers without specialized skills.

So, what roles are tariffs playing in this slowdown? President Trump’s wide-ranging tariffs continue to raise costs for both businesses and consumers. The Budget Lab at Yale estimates all 2025 U.S. tariffs, paired with retaliation from trading partners, will lower real GDP growth by 0.5 percentage points this year and next—and lift unemployment by 0.3 to 0.4 percentage points, translating to nearly 500,000 fewer jobs by the end of 2025. The price effects are direct: Yale’s analysis projects a 1.8% short-run boost in consumer prices, costing households an average of $2,400 annually if companies pass cost increases along. J.P. Morgan has echoed these warnings, highlighting how tariffs—especially on auto imports—will lift prices and act as a drag on overall GDP growth.

For American workers, these combined forces—sluggish job creation and pricier goods—mean a tough stretch ahead. Many are taking longer to find new employment, and the willingness to quit and switch jobs has declined as available opportunities dry up. Meanwhile, many job gains are in sectors requiring skills not easily acquired by laid-off workers, deepening a growing mismatch in the labor market.

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Analysts caution that the combined drag from slow hiring and rising tariffs could put consumer spending—long a driver of U.S. economic health—at risk. If this weak spell persists, further Federal Reserve interest rate cuts may be on the table.

In short, slower job growth and higher tariffs are squeezing American workers from both sides: jobs are harder to find, and day-to-day expenses are rising. While the economy remains resilient for now, the risks of further slowdown, or even recession, loom if these trends deepen through the end of 2025.

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