US Job Market Slowdown: Impact of Donald Trump’s Tariffs on Hiring

The U.S. labor market is showing signs of a slowdown, with job creation expected to decline in June. Reports suggest that only 115,000 jobs were added last month, a decrease from 139,000 in May, marking the weakest monthly gain since early 2023. The unemployment rate is projected to rise to 4.3%, the highest level since October 2021, reflecting a significant cooling of the job market since the post-pandemic boom.

Declining Job Growth

According to estimates from FactSet, the anticipated addition of 115,000 jobs in June represents a notable decline in the pace of job growth. This figure is significantly lower than the average monthly job gains of 124,000 recorded this year, which contrasts sharply with the 168,000 average in 2024 and a robust 400,000 between 2021 and 2023. Economists attribute this slowdown to a combination of factors, including trade tariffs, hiring freezes, and immigration policies implemented by the Trump administration. The labor market’s cooling trend has raised concerns about its long-term stability, as businesses become increasingly cautious about hiring amid economic uncertainty.

Impact of Trade Policies

President Trump’s trade tariffs and immigration policies are seen as major contributors to the current labor market challenges. The imposition of tariffs, including a 10% duty on most U.S. trading partners and increased levies on steel, aluminum, and automobiles, has raised operational costs for businesses. This has led to a decrease in hiring as companies grapple with the financial implications of these policies. Susan Spence, chair of the ISM manufacturing survey committee, emphasized the need for stability in trade policies, stating that the erratic nature of tariff decisions has left supply chains disrupted and manufacturers hesitant to commit to new hires.

Private Sector Job Losses

Recent data from payroll firm ADP indicates a surprising drop of 33,000 jobs in June, marking the first decline in recent years. This downturn primarily affected sectors such as education, health services, and business support roles. ADP’s chief economist, Nela Richardson, noted that while layoffs remain uncommon, a general hesitancy to hire and reluctance to replace departing workers have contributed to the job losses. The report highlights a growing trend of caution among employers, which could signal a broader shift in the labor market.

Federal Employment and Labor Force Shrinkage

Federal employment is also expected to decline, with projections indicating a loss of 20,000 government jobs in June due to hiring freezes and voluntary exits. Additionally, immigration enforcement measures may be contributing to a shrinking labor force. In May, the workforce saw a significant reduction of 625,000 individuals, the largest decline in 18 months. Economists are closely monitoring these trends, as they suggest that the slowdown in job creation could be more pronounced than initially anticipated. LPL Financial’s Jeffrey Roach warned of a potential downside surprise in upcoming employment data, indicating that the broader hiring trend is weakening.

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