U.S. hiring is significantly decelerating, a direct consequence of President Donald Trump’s unpredictable and aggressive trade policies that are casting a pall over American businesses and the broader US Economy. This slowdown signals a palpable shift in the Labor Market, moving away from the robust growth seen in recent years and raising concerns among economists.
Experts are increasingly vocal about this downturn. Scott Anderson, chief U.S. economist at BMO Capital Markets, noted a “notable deterioration” in labor market conditions, attributing it to the tariff and Trade War that began months ago, compounded by more restrictive immigration policies. This assessment underscores the growing risk of a “harder landing” for U.S. Employment, diverging from previous projections.
The recent jobs report has indeed sounded an alarm, confirming economists’ long-held warnings that the extensive trade disputes with global partners would manifest as economic headwinds by summer. However, President Trump’s reaction to the unfavorable data was to controversially call for the dismissal of Erika McEntarfer, director of the Labor Department’s Bureau of Labor Statistics, accusing her of political bias.
These new revelations deeply question the fundamental health of the job market and the overall economy as the Trump administration continues its unconventional overhaul of American trade policy. Decades of efforts to reduce global trade barriers have been discarded, replaced by substantial import taxes—Trump Tariffs—on goods from nearly every nation, with the stated aim of revitalizing domestic manufacturing and funding tax cuts.
The economic burden of these tariffs is clearly impacting American consumers and businesses. Major corporations like Walmart, Procter & Gamble, Ford, and Nike have already increased prices due to these levied taxes. Goldman Sachs economists estimate that only a fraction of the rising costs from tariffs have been absorbed by overseas exporters, leaving the vast majority of the financial burden to be shouldered by U.S. entities. This illustrates the complex nature of current Economic Policy.
The erratic implementation of these tariffs, characterized by announcements, suspensions, and sudden new impositions, has created widespread uncertainty. A recent executive order imposing fresh tariffs on numerous U.S. trading partners, effective in early August, followed a week of unexpected tariff-related actions, further disrupting business planning and exacerbating economic anxieties, especially within the context of the ongoing Trade War.
While some economists like Blerina Uruci of T. Rowe Price observe a slight pickup in July hiring from earlier depressed levels, suggesting a potential move past the absolute worst, she still anticipates muted hiring in the coming months. This muted growth is largely attributed to a limited supply of available workers, a direct consequence of reduced immigration and an aging population, as highlighted by Guy Berger of the Burning Glass Institute, who likens the situation to labor markets in southern Europe or Japan. This impacts the overall Employment outlook.
Despite the administration’s claims that tariff hikes would boost American manufacturing, the sector has seen consistent job losses, shedding thousands of positions monthly. Similarly, the federal government and administrative support roles have experienced significant employment declines. Revisions to job data further revealed a stark slowdown, with the U.S. economy generating barely half the monthly average jobs compared to the previous year, and significantly less than the post-pandemic rebound period, impacting the overall US Economy.
This economic reality has profound implications for monetary policy. Previously, Federal Reserve Chair Jerome Powell cited a robust job market as a reason for patience regarding interest rate decisions. Now, with the Labor Market showing signs of strain, pressure is mounting on the Fed to consider reducing borrowing costs. Wall Street investors have reacted by sharply increasing their expectations for a rate cut at the upcoming September meeting, signaling a clear shift in market sentiment.
