WASHINGTON : The disappointing numbers come just days after the Federal Reserve held interest rates steady, casting fresh doubt on whether a rate cut is on the horizon.

The Labor Department reported Friday that nonfarm payrolls rose by just 73,000 jobs in July, far below the 110,000 forecast by economists. June’s figures were also revised down significantly, from an initially reported 147,000 to just 14,000, underscoring a steep deceleration in hiring momentum.

The unemployment rate edged up to 4.2%, from 4.1% in June, staying within the narrow band seen since May 2024. The range of forecasts for July varied widely, with estimates ranging from no job growth at all to a possible gain of 176,000 positions.

The weaker-than-expected report adds pressure on an already uncertain economic outlook. Federal Reserve Chair Jerome Powell, speaking after the central bank held its key interest rate at 4.25%-4.50% earlier this week, noted the labor market appears “in balance”, but warned of “downside risk” as both labor demand and supply cool simultaneously.

Several factors are weighing on job creation, including heightened trade tensions. On Thursday, President Donald Trump imposed 35% tariffs on goods from several key trading partners, including Canada, just ahead of a new trade deal deadline. The uncertainty around tariff levels continues to cloud the hiring outlook for businesses.

Adding to the slowdown are structural challenges such as stricter immigration policies and the accelerating retirement of baby boomers, which are shrinking the available labor pool. Economists now say the economy may need to add only 100,000 jobs per month or fewer to maintain pace with population growth.

The latest data has pushed market expectations for a Fed rate cut from September to October, although rising inflation due to tariffs may narrow the window for further monetary easing this year.

Some economists, however, still believe the Fed could move in September, especially if next month’s preliminary benchmark revision from the Bureau of Labor Statistics reflects a larger downward adjustment in employment from April 2024 to March 2025. Data from the Quarterly Census of Employment and Wages suggests that job growth during that period may have been overstated.

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