US unexpectedly loses jobs in blow to Trump ahead of midterms
The US lost 23,000 jobs in July, raising concerns about the economy ahead of the November midterm elections.
A job seeker waits to talk to a recruiter at a job fair Aug 28, 2025, in Sunrise, Fla. (Photo: AP/Marta Lavandier)
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WASHINGTON: The United States unexpectedly lost thousands of jobs in July, government data showed Friday (Aug 7), a blow to US President Donald Trump’s claims of leading an economic revival as his Republican Party gears up for crucial midterm elections.
The world’s largest economy lost 23,000 jobs in July, data published by the US Bureau of Labour Statistics showed, signalling potential labour market weakness after months of steady growth.
The unemployment rate ticked down to 4.1 per cent, likely a result of falling labour supply as the US economy grapples with an aging population and lower net migration.
Since taking office for his second term, Trump has unleashed a spate of policies aimed at reviving domestic manufacturing and curbing surging inflation.
Republicans face a stiff test in November’s midterm elections, with the state of the economy a key issue for Democrats who are seeking to wrest back control of both houses of Congress.
Friday’s data will also pose a question to the US Federal Reserve, which has been signalling it was preparing for a rate hike later this year.
IMPLICATIONS FOR FED
The bulk of the loss in July was attributed to the local government education sector, which sees thousands of teachers drop off payrolls in the summer months.
Still, analysts had expected overall job growth. Economists polled by Dow Jones Newswires and the Wall Street Journal anticipated 83,000 new jobs would be added in July.
The BLS also revised down job growth in the previous two months by 103,000, showing the labour market to be less robust than previously reported.
Based on the new figures, job growth hit a peak in March before declining in the next three months and entering negative territory in July.
White House economic advisor Kevin Hassett dismissed Friday’s data as being based on a survey that is “very, very noisy.”
The unemployment rate has remained relatively steady through choppiness in the labour market, due to the overall drop in labour supply.
Friday’s figures showed the labour force participation rate – a key metric – had dropped to its lowest level since the height of pandemic-related closures.
Policymakers at the US Federal Reserve watch the labour market closely, as their dual mandate requires them to deliver maximum employment while ensuring inflation remains at a long-term target of two percent.
The Fed has missed that target for five years, as inflation has battered US households since the pandemic.
Last month, the central bank held interest rates steady, but three regional Fed presidents dissented in favour of a rate hike.
“This morning’s report is a game changer in the sense that all of the recent focus has been on inflation and this report highlights the risks that are embedded in the labour market as well,” said Chris Zaccarelli of Northlight Asset Management.
Kathy Bostjancic, chief economist at Nationwide, said the Fed would not be swayed by a single job report from its inflation focus.
“The soft labour market report should lower market expectations for a Fed rate hike in the coming months, but the inflation reports will be the key focus for Fed officials,” she said.
WAGES LAG INFLATION
Sector-wise, retail trade lost 19,000 jobs, with employment declining in warehouse retailers – firms like Costco, Sam’s Club and others that offer discounts for wholesale quantities of household goods – and general merchandise stores.
Employment in the financial activities sector continued its downward trend, having lost 121,000 jobs from its May 2025 peak.
The health care sector has buoyed the US labour market over the last year, with more Americans aging and requiring medical assistance.
In July, the sector added 22,000 jobs, but it was a slower pace than its average gain over the last year.
Average hourly earnings increased by 3.2 per cent year-on-year, lagging inflation and therefore leaving workers with less income in real terms.
Diane Swonk, chief economist at KPMG, said persistent inflation and a potentially weak labour market could put the Fed in a tough spot when it meets to set rates next month.
“The worst combination for the Fed is if inflation remains sticky while the labour market weakens,” she said.
“That would not take rate hikes off the table; it would make them more painful.”
Source: AFP/fs
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