The United States labour market delivered an unwelcome surprise last week. The Labor Department reported that employers unexpectedly cut 23,000 jobs in July, and revised May and June's already-published figures down by roughly 100,000 jobs combined, according to Connecticut Public and other member stations carrying NPR's Weekend Edition Sunday.
For European readers watching the health of the world's largest economy, and one of the EU's biggest trading partners, the numbers matter well beyond Washington. A cooling US labour market can shape everything from the dollar's value against the euro to demand for European exports.
An economist urges calm
On NPR's Weekend Edition Sunday, host Ayesha Rascoe put the obvious question to Jed Kolko, a senior fellow at the Peterson Institute for International Economics: should Americans be alarmed? Kolko, who previously served as under secretary for economic affairs at the US Commerce Department during the Biden administration, was measured in his response.
“"I don't think Friday's jobs report is cause for alarm. Let's unpack what we actually learned on Friday."”
His reasoning centres on a detail that can get lost in headline job-loss figures: the jobless rate itself did not rise. As Kolko put it, "The economy lost jobs. At the same time, the unemployment rate actually went down." Separate reporting from Fortune, citing the same Labor Department release, noted that the unemployment rate dipped to 4.1 percent, though it added a caveat that the dip occurred partly because fewer Americans were actively looking for work, not purely because more found jobs.
Immigration policy's fingerprint on hiring
Kolko also pointed to a less obvious driver behind the slowdown: immigration policy. He told NPR that "we have seen clear effects of immigration policy on the labor market," adding that overall workforce growth has slowed as a result, while job growth has diverged sharply between industries that rely heavily on immigrant labour and those that do not. That distinction matters for policymakers in Brussels and other European capitals too, where migration and labour supply are similarly contentious and economically consequential debates.
The jobs report lands in a politically charged moment. Fortune reported that the reversal represents a political setback for President Donald Trump, coming less than three months before his Republican party seeks to hold Congress in the midterm elections. Weak labour data of this kind tends to sharpen scrutiny of an administration's economic record heading into a vote.
Inflation, the other half of the picture
The NPR interview also touched on inflation, the other pillar of the US economic outlook that European investors and the European Central Bank track closely given how intertwined transatlantic financial markets remain. The most recent Consumer Price Index data, covering June, showed that US inflation cooled as falling petrol and energy costs pulled headline prices lower, slowing the annual rate to 3.5 percent, according to figures compiled by US Inflation Calculator from the Bureau of Labor Statistics. Core inflation, which strips out volatile food and energy prices and is often seen as a better gauge of underlying price pressure, was unchanged for the month and stood at 2.6 percent for the year, per Bureau of Labor Statistics data.
Taken together, a softening but not collapsing jobs market alongside gently easing inflation is the kind of mixed signal that economists like Kolko argue should prompt careful analysis rather than panic. For European businesses and policymakers, the takeaway is less about any single data point and more about the trajectory: after several months of downward revisions to earlier job growth estimates, confidence in the strength of the US recovery has become harder to take for granted.
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