US job market slowdown: Donald Trump’s tariffs, hiring freeze may weigh on employment; data signals rare private sector contraction

The United States is expected to have witnessed a further slowdown in job creation during June, with President Donald Trump’s trade tariffs, hiring freeze, and immigration crackdown taking a toll on the labour market. As per news agency AP, the labor department is likely to report that just 115,000 jobs were added last month, down from 139,000 in May, according to estimates by FactSet. If accurate, this would mark the weakest monthly gain since early 2023.The unemployment rate is expected to tick up to 4.3 per cent, its highest level since October 2021, but still relatively low by historical standards. Economists say the US job market has cooled significantly since its post-pandemic boom, with average monthly job gains dropping to 124,000 this year, from 168,000 in 2024 and 400,000 between 2021 and 2023.While interest rate hikes by the Federal Reserve in 2022 and 2023 had initially slowed hiring, Trump’s unpredictable trade and immigration policies are now seen as weighing heavily on business confidence. “That whiplash has to stop and it has to stay stopped,” said Susan Spence, chair of the ISM manufacturing survey committee, referring to Trump’s stop-start tariff decisions that have left supply chains rattled and manufacturers hesitant to commit to hiring, as per AP.Private sector data signals further weakness. As per AFP, payroll firm ADP reported a surprise drop of 33,000 jobs in June, the first such decline in recent years, with job cuts mostly in education, health services, and business support roles. “Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month,” said ADP chief economist Nela Richardson, adding that pay growth remained steady for now.Trump’s reimposed tariffs, including a sweeping 10 per cent duty on most US trading partners and higher levies on steel, aluminium, and autos, have increased business costs and stifled hiring. “Weinberg cautioned that companies are likely to respond to the chances of a tariff-induced hike in costs by becoming more aggressive about trimming their workforces,” AFP quoted Carl Weinberg of High Frequency Economics as saying. Some analysts fear this may be the start of a larger pullback.Federal employment also appears to be shrinking. Oxford Economics’ Nancy Vanden Houten expects a 20,000 drop in government jobs in June due to Trump’s hiring freeze, voluntary exits, and pending court rulings on layoffs. Meanwhile, immigration enforcement could be shrinking the overall labour force. In May alone, the workforce shrank by 625,000 people — the sharpest decline in 18 months, as per AP.While the data will be clarified once official numbers are released, economists warn that the slowdown could be deeper than anticipated. “We could be in for a downside surprise,” LPL Financial’s Jeffrey Roach said, cautioning that even if ADP data diverges from official figures, the broader hiring trend appears to be weakening, according to AFP.