Employers continued to create jobs but pulled back on hiring, a sign that more businesses are putting expansion plans on hold as they deal with economic uncertainty.
The economy added 73,000 jobs last month, the Labor Department reported on Friday, lower than economists’ expectations. The unemployment rate slightly rose to 4.2 percent, up from 4.1 percent the month before.
In a sign that the labor market may not have been as robust as it seemed earlier this year, job gains from the past two months were also revised down by a total of 258,000, an unusually high number.
The labor market has so far continued to hold up this year. But the slower growth in payrolls signal that cracks in the job market are deepening. Economists have warned that chaotic tariff policies, immigration restrictions and job losses in the federal government could further dampen growth.
“I think we’re looking at a labor market that’s not absolutely falling off a cliff, but it’s getting materially weaker,” said Oliver Allen, a senior U.S. economist at Pantheon Macroeconomics.
Employers added fewer jobs in July than expected, reflecting a labor market that has been moderately cooling this year as high interest rates have weighed on businesses. Last year, the economy added an average of about 168,000 jobs each month.
Economists expect President Trump’s policies to more substantially hit the labor market in the coming months. Higher tariffs on dozens of countries are set to go into effect on Aug. 7. The Trump administration has reached deals with some trading partners, but officials are still finalizing the details and hashing out agreements with other countries. Lower immigration and efforts to ramp up deportations could also strain labor supply for industries that depend on foreign-born workers.
Economists say the steady pace of job gains reflect the uncertainty that businesses have faced as on-and-off again tariff policies have made it difficult to move forward with expansion plans.
“It’s hard to pull the trigger on hiring when you’re uncertain about where tariffs are going to land,” said Diane Swonk, the chief economist at KPMG. “It’s the uncertainty that causes the paralysis.”
The jobs report comes two days after the Federal Reserve held interest rates steady. The central bank has taken a wait-and-see approach and shown little urgency to lower rates, in part because of the labor market’s durability. Two members of the Board of Governors, however, dissented.