Labor Market Lost Steam as Tariffs, Interest Rates Stifled Job Creation

Key Takeaways
U.S. employers had 7.2 million job openings in July, the most recent data in the Job Openings and Labor Turnover Survey. That’s down from 7.4 million in June and the lowest since September 2024.
Tariffs and high interest rates have stifled job creation, although employers have avoided mass layoffs so far.
The report on job openings added detail to a government report from July showing the hiring market has slowed down significantly in recent months.

Employers had fewer open jobs in July than forecasters expected, adding to evidence that the job market is stumbling amid tariffs and high interest rates.

The U.S. economy had 7.2 million job openings in July, down from 7.4 million in June and the fewest in a year, the Bureau of Labor Statistics said Wednesday. It was also fewer than the 7.4 million forecasters had expected, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal.

The Job Openings and Labor Turnover Survey (JOLTS) report added detail to the bureau’s job market report for July, which showed hiring has been lackluster all summer. Many businesses have put hiring and expansion plans on hold while waiting to see how Trump’s sweeping new import taxes will affect prices, interest rates, supply chains, and consumers.

“The July JOLTS report showed a message consistent with other labor market indicators—the U.S. job market continued to lose steam over the summer,” Ali Jaffery, an economist at CIBC, wrote in a commentary.

Despite the job opening slowdown, businesses continued to avoid mass firings, with the layoff rate remaining at the same low level it’s been for more than a year. There was exactly one job opening for every unemployed worker, the same as in March and far lower than the two openings per worker in 2022 when the job market was much hotter.

Another factor holding back the job market is the high federal funds rate the Federal Reserve has maintained in an effort to quell the post-pandemic surge of inflation. The Fed’s key interest rate has kept borrowing costs high on all kinds of loans, cooling down the economy and job creation. Fed officials are currently considering whether to cut rates in September to boost the job market, weighing the benefits against the danger of setting off a fresh round of inflation as tariffs push up consumer prices.