WASHINGTON — The U.S. job market took a dramatic turn for the worse in July, dealing a blow to consumer confidence and setting off fresh concerns for retailers already bracing for the impact of President Donald Trump’s sweeping new tariffs.
Employers added just 73,000 jobs last month, the Bureau of Labor Statistics reported Friday, far below expectations, while deep revisions to earlier figures painted an even bleaker picture. May’s job gain was slashed from 144,000 to just 19,000, and June’s from 147,000 to 14,000. That’s 258,000 fewer jobs than previously reported, leaving payroll growth over the last three months averaging just 35,000 jobs per month — the weakest stretch since the pandemic’s onset in 2020.
The unemployment rate held at 4.2%, but the stability masks a troubling trend: more Americans are leaving the workforce. Labor force participation has declined by half a percentage point over the past year, and without robust hiring in healthcare, which added 55,000 jobs in July, the U.S. would have posted net job losses in each of the last three months.
“This is a wake‑up call,” said Seema Shah, chief strategist with Principal Asset Management. “The downward revisions completely change the narrative about labor market strength. With the negative impact of tariffs only beginning to filter through, the next few months could look even worse.”
NRF says tariffs will hurt Americans
In a statement Friday, the National Retail Federation (NRF) Executive Vice President of Government Relations David French urged the administration to pursue “binding trade agreements that truly open markets by lowering tariffs, not raising them.”
“Tariffs are taxes paid by U.S. importers and are eventually passed along to U.S. consumers,” French said. “These higher tariffs will hurt Americans, including consumers, retailers and their employees, and manufacturers, because the direct result of tariffs will be higher prices, decreased hiring, fewer capital expenditures and slower innovation.”
“We have heard directly from small retailers who are concerned about their ability to stay in business in the face of these unsustainable tariff rates,” French said.
Tariffs tighten the squeeze
The disappointing jobs report landed just one day after Trump finalized a sweeping new tariff order that will raise import duties on dozens of trading partners. Average effective tariffs will now run close to 15% across all goods — the highest rate since the 1930s. Duties will reach as high as 50% on certain products from Brazil, 35% from Canada, and 25% from India, while most other countries will face a baseline rate of 10%.
Retailers say the combined effect of slower job growth and higher tariffs is a double hit: households have less spending power, and the goods they buy, from apparel and electronics to furniture and holiday merchandise, will soon cost more.
Furniture, appliances, and other durable goods have already shown price spikes in government data, with home furnishings up 1.3% in June, the largest monthly gain in over three years.
Markets and Fed expectations shift
The jobs data rattled financial markets Friday morning. The Dow Jones Industrial Average dropped more than 700 points, the Nasdaq fell over 2%, and the S&P 500 lost 1.7%. Bond yields tumbled as investors shifted to safer assets.
The report also shifted expectations for Federal Reserve policy. Earlier this week, the Fed kept interest rates unchanged, with Chair Jerome Powell citing a strong labor market. Now, futures markets indicate an 80% chance of a rate cut in September, up from 40% before the report.
Still, the Fed faces a tricky balancing act. While job growth is faltering, inflation pressures are creeping higher, partly due to the tariffs. The Personal Consumption Expenditures index rose 2.6% year‑over‑year in June, and analysts warn that new import duties could accelerate that trend.
“It’s a precarious position for the Fed and the economy,” said Daniel Hornung, a senior fellow at MIT and former deputy director of the National Economic Council. “We’re looking at slower growth and higher prices — a textbook case of stagflation risk, and tariffs are a big driver.”
Retail outlook darkens
For retailers, the combination of weaker job creation, slowing wage gains, and looming price hikes on imported goods could significantly impact back-to-school and holiday sales. While average hourly earnings were up 3.9% in July compared to the same period a year ago, the pace has slowed in recent months, and higher prices could erode any real spending power.
Retail employment itself was flat in July, signaling that merchants may already be pulling back on hiring ahead of what could be a difficult second half. Manufacturing job losses, down 11,000 in July, may also ripple into retail, as reduced factory output can dampen wholesale orders and in‑store assortments.
The revised jobs data now underscores a more fragile economic backdrop than previously thought, one that could challenge even the strongest retail operators.
As the Labor Department’s next jobs report looms in early September, retailers will be watching closely not only for signs of consumer resilience but also for clues about whether the U.S. economy is heading for a prolonged slowdown just as higher tariffs take hold.
