The underlying reality

Job numbers can bounce around from month to month. That is why it is important to look at the trend over multiple months.

With downward revisions to the numbers for May and June, the three-month moving average of job gains was 20,000 in July.

That is a major deceleration, which is bad news. But it is still more than enough to keep up with population growth and to keep unemployment trending down.

Only a few thousand jobs each month are needed, thanks in large part to Trump’s crackdown on illegal immigration.

Because fewer migrants are coming into the country looking for work, fewer people need and are taking jobs.

Conversely, employment rates are high, showing the underlying strength of the labor market.

Prime-age employment, meaning for those between the ages of 25 and 54, has held near all-time highs. It rose in July.

No signs of a recession

The most reliable warning sign for a recession is a fast rise in the unemployment rate. That is not happening.

The unemployment rate, taken from the jobs report’s household survey, is still low by historical standards. It has drifted upward in recent years, but only gradually. It dropped to 4.1% in July.

ECONOMY LOST 23,000 JOBS IN JULY, FALLING SHORT OF EXPECTATIONS

Friday’s data suggests that the U.S. labor market is moving away from triggering one major recession indicator — namely, when the three-month moving average of the unemployment rate rises half a percentage point relative to its minimum point over the past year. This indicator, known as the Sahm Rule, has signaled the start of all post-war recessions.

The indicator was triggered in mid-2024, but it is not signaling a recession right now.

Federal government employment has dropped

One factor holding back overall job growth is the Trump administration’s reductions to the federal government workforce. Trump officials maintain that cutting the federal government is good for the overall economy.

Federal government employment dropped by 3,000 in July. It had been declining in recent months. It plunged in October thanks to the end of the “deferred resignation” promoted by the Trump administration at the end of September. Federal employment is now down about 327,000 since Trump came into office.

But manufacturing employment is down, too

Employment in manufacturing rose by 5,000 in July, adding to a recovery in recent months.

Trump has said that his tariffs will reshore and boost domestic manufacturing. He’s imposed tariffs on China and trading partners around the world, and on steel, aluminum, autos, auto parts, and a number of other goods and services.

So far, though, the sector has lost 62,000 jobs during his time in office.

Leisure and hospitality job growth is off the pre-pandemic trend

The leisure and hospitality sector has, over the past year, exceeded the employment levels it reached in February 2020, right before restaurants and bars were forced to shut down across the country.

The sector lost 40,000 jobs in July and is now just barely above its pre-pandemic level of employment. It is well off the pre-pandemic pace of hiring.

Construction job growth has held up

Construction employment rose by 22,000 in July.

Construction is a key sector to watch for signs of trouble in housing. The homebuilding industry has been at risk in recent years because of soaring prices and higher mortgage rates, which have kept some buyers on the sidelines. The sector is also under pressure from Trump’s tariffs and his immigration overhauls.