Employers have sharply pulled back their hiring, a sign that the labor market is weakening and more businesses are putting expansion plans on hold as they deal with economic uncertainty created by President Trump.
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 an indication that the labor market was not as resilient as it seemed earlier this year, job gains from the previous two months were also revised down by a total of 258,000, an unusually high number that came as a surprise.
The slower growth in payrolls signals that cracks in the labor market are deepening, and it touched off concerns that conditions could further deteriorate as Mr. Trump’s economic policies take hold. Economists have warned that chaotic tariff plans, immigration restrictions and job reductions in the federal government could significantly dampen growth in the coming months.
“After this report, it doesn’t look like a particularly healthy jobs market,” said Oliver Allen, a senior U.S. economist at Pantheon Macroeconomics.
The slowdown reflects a labor market that had already been cooling as high interest rates weighed on businesses. Although the labor market has generally been holding up this year, economists have been pointing to the slower pace of job gains. Last year, the economy added an average of about 168,000 jobs each month. So far this year, employers have created an average of about 85,300 jobs each month.
Most of the job gains in July were driven by increased employment in the health care industry, where hiring has been concentrated as the nation ages and requires more care.
But other sectors continued to shed jobs or showed signs of weakness. Government employment fell in July amid the Trump administration’s efforts to slash the federal work force. The federal government lost 12,000 jobs last month, and is down by 84,000 jobs since the start of the year.
Manufacturing employment also declined by 11,000 jobs in July, the third straight month of losses. Mr. Trump’s tariffs are intended to boost manufacturers and encourage consumers to buy domestically. But steeper tariffs have pushed up costs for foreign parts and other imported materials, hurting some factories.
The professional and business services industry also lost thousands of positions, extending a streak of declines.
Economists expect Mr. Trump’s policies to continue to weaken the job 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.
As steeper costs from import taxes eat into profits, companies could have a harder time hiring workers or begin to lay off employees. Lower immigration and efforts to ramp up deportations could also strain industries that depend on foreign-born workers.
The jobs report came two days after the Federal Reserve held interest rates steady for the fifth time this year. The central bank has shown little urgency to lower rates, in part because of the labor market’s durability in recent months. Two members of the Board of Governors dissented and supported the Fed lowering interest rates by a quarter of a percentage point in July. Those members had been arguing that the labor market was flashing warning signs.
The weak jobs report raises the chances that the Fed will cut rates at its next meeting, in September. Mr. Trump has assailed Jerome H. Powell, the Fed chair, and repeatedly pressured the central bank to lower rates. After the report’s release, Mr. Trump again urged the Fed to cut borrowing costs.
“Too Little, Too Late. Jerome ‘Too Late’ Powell is a disaster,” Mr. Trump wrote in a post on Truth Social. “DROP THE RATE! The good news is that Tariffs are bringing Billions of Dollars into the USA!”
Although economists say the slower growth in payrolls points to a labor market that is stalling, they also note that the unemployment rate remains relatively low, in part because of a reduced supply of workers.
Economists expect immigration restrictions to continue to put downward pressure on population growth, meaning that more modest job gains could be a reflection of slower growth in the labor force.
Other economic data released this week have reflected relatively stable demand for workers. Job openings were slightly down in June, although they have remained at similar levels throughout the year. Companies are pulling back on hiring, but layoffs have remained low.
“Some of the other labor market indicators haven’t deteriorated quite as much,” said Daniel Zhao, the chief economist for the recruiting site Glassdoor.
Wages continued to grow in July, climbing 0.3 percent from the prior month and 3.9 percent over the year.
In a more worrying sign, the number of long-term unemployed people, or those who were out of a job for more than six months, continued to pick up in July. Taken together, the data suggest that employers are trimming hiring rather than cutting workers entirely.
Economists say that the smaller job gains in recent months 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.”
Tariff policies have been affecting companies like The Taylor Group Inc., an industrial and equipment manufacturer based in Louisville, Miss. Lex Taylor, the company’s chairman and chief executive, said the firm has been adding jobs this year and he thought the tax provisions in the domestic policy bill that Mr. Trump signed into law last month would help boost the firm.
But he said that uncertainty stemming from tumultuous economic policies has made it harder to expand. Mr. Taylor said there was “no question” that the company would have hired more workers this year if Mr. Trump had not pursued steeper tariffs on trading partners.
“It has caused a little freeze,” Mr. Taylor said, adding that the uncertainty has caused some of his customers to “hold back” their budgets and orders on equipment.
The jobs report caps a week that saw of flood of new economic data. Some of the figures fueled concern that tariffs were starting to push up consumer prices.
A key inflation measure showed that price growth modestly accelerated in June. Prices for physical goods rose, with the biggest increases in categories that are particularly affected by tariffs.
Some economists have also voiced concerns that consumers have pulled back on spending this year. A measure of consumer spending climbed at a 1.4 percent annual rate in the second quarter, which was up from 0.5 percent in the previous quarter. But it was down from the 2.8 percent growth in spending in 2024.
“The data shows us that the underlying economy has slowed significantly,” Ms. Swonk said. “We know that headwinds are mounting as we move into the second half of the year, and that’s worrisome.”
Madeleine Ngo covers U.S. economic policy and how it affects people across the country.
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