Tariffs and Tech Disrupt Hiring Across U.S. Industries

As of August 1st, 2025, the Federal Reserve is closely watching the health of the U.S. labor market to determine its next steps on interest rates. The central bank has held off on cutting rates so far this year, wanting to see how inflation and job creation respond to higher tariffs imposed by the Trump administration.

The next major economic indicator arrives on Friday with the release of the July employment report. Economists predict a lackluster 100,000 new jobs were added last month, which would be the smallest increase so far in 2025. Businesses have been hesitant to fill open positions due to uncertainty around the impact of trade wars and tariffs.

Furthermore, the unemployment rate is forecast to rise to 4.2% in July from 4.1% the prior month. Fed officials say they won't be too concerned about a slight uptick in the jobless rate, as long as layoffs and overall unemployment remain low. However, a more steady increase to 4.5% or higher could definitely trigger additional rate cuts from the central bank.

The slowdown in hiring has been broad-based, with the number of industries adding jobs declining in recent months. This "diffusion index" has fallen below 50 in two of the past three months, a concerning sign last seen during the 2007-09 recession. Healthcare and government have been the primary sources of new jobs this year.