The US jobs report by the Bureau of Labor Statistics for July once again proved economists wrong, or appeared to — the number of jobs added, 73,000, was far below expectations. The numbers for May and June (see SIGnal, “The Jobs Conundrum,” July 6, 2025) were revised downwards by an extraordinary 88%. President Donald Trump reacted by saying the numbers were “politically motivated” and firing the Biden-era head of the BLS, Erika McEntarfer, now temporarily replaced by her Obama-era deputy. (McEntarfer had been confirmed with strong Republican support in January 2024, including from Senator J.D. Vance.) Presidents do not often fire agency heads in quite this fashion and the dismissal dominated headlines. But investors pay attention to facts and the facts about the US job market are not very good.
There is really no reason to think that the BLS was falsifying statistics to create bad news any more than it was falsifying them when the news was good. BLS mid-month estimates are based on a somewhat small sample (560,000 business are surveyed) and as the sample gets more complete after the 12th of the month the statistics change and grow more accurate. Sometimes they go up, sometimes they go down. They don’t often stick right at the mid-month estimate, although the May-June revision was of a steepness not seen since 2021.
SIG’s analysis of July 6, for better or worse, has mostly held up. The jobs market was soft then and still is, although the symptoms in July were different than in June. But unemployment as such has been relatively low and steady. The problems are in job creation. In June, job gains were led by state and local government (overwhelmingly in education), “health care and social assistance,” and “leisure and hospitality.” The downward revisions were accounted for mainly (40%) by revised education-job figures; the other 60% was spread across industries. In July, the gains were led by health care and social assistance, retail, and leisure and hospitality. Manufacturing continued its steady decline.
The Trump administration has never aimed at creating more government jobs, so the large downward revision in public-education employment, which is paid for by taxes, should not, strictly speaking, have drawn such a severe reaction from the White House. But the headlines were negative and they drew a headline-based response. The drama masked the deeper problem that the US economy continues to lose employment for American workers “who makes things with their hands,” as Vance said at the Republican convention last year. It is gaining jobs for those who look after the elderly and the infirm in an aging population and those who entertain and accommodate people who have money to spend. Overall, it is not growing. The pace of hiring is increasing at the slowest rate in a decade, excluding the pandemic.
When President Trump was elected last year it was greatly on the back of increased support among working and lower-class constituencies, most distinctively black, Hispanic and Asian voters and younger voters. It was an aspirational demographic that did not think Biden policies were good for the economy that mattered to them. Republican politicians hearing from their constituencies over the summer recess will have to explain why their expectations of the economy have not been met.
The president is likely to blame Federal Reserve chairman Jerome Powell for not lowering rates. Presidents blame the Fed on a regular basis. But the pressure on Powell and others on the board is likely to ratchet up significantly. After all, Powell did say on Wednesday that the job market was sound, and two days later the BLS statistics indicated the opposite. Inflation is still relatively steady. The Fed’s dual mandate is to boost employment and fight inflation. So a rate cut seems more than likely. Powell and many others believe this will fuel inflation. If it does, Trump in the fall will have an economy with many of the problems that the Biden economy had, with an increased decline in manufacturing and very little job creation in other sectors. And the economic renaissance predicted by the administration as a result of government support for AI will not have had enough time to occur, if it occurs at all. The huge increase in Big Tech valuations based on AI expectations could very well be a bubble.