Labor Market at Stall Speed: Cracks Emerge in Jobs Data
The Most Unreliable ‘King of Numbers’: Today’s NFP Expected at Just 70–80,000 New Jobs
The U.S. labor market appears to be hitting the brakes after a period of robust post-pandemic growth. Recent employment reports show sharp declines in job creation, stubbornly low workforce participation, and longer spells of unemployment. For the first time since early 2021, the number of unemployed persons now exceeds the number of job openings[1], a clear signal that demand for labor has cooled significantly. Employers added an average of only 35,000 jobs per month from May through July – down from 123,000 per month at the start of the year[2] – after accounting for major downward revisions to prior data. These cracks in the labor market have economists debating whether the economy is merely cooling off or sliding toward a recession. In this article, we delve into three key charts that illustrate the labor market’s turn: the dramatic slowdown in hiring, a decline in labor force participation, and rising durations of unemployment. We then discuss what these trends mean for the economic outlook and Federal Reserve policy.
Job Growth Slows to a Crawl
Figure: U.S. Monthly Nonfarm Payrolls (Jobs Added). Monthly change in total nonfarm payroll employment, with recessions highlighted in gray. Recent months have seen job creation plunge to levels typically observed right before recessions.
After two years of robust job gains coming out of the pandemic recession, hiring has now downshifted to “stall-speed”[3]. In July 2025, employers added just +73,000 jobs, far below consensus forecasts of around 110,000[4]. Even more striking, the previous two months were revised down to practically zero growth – May’s payroll change was cut from +144,000 all the way to just +19,000, and June’s from +147,000 to +14,000[5]. These were unusually large revisions (the biggest two-month downward revision since 1968 according to the Bureau of Labor Statistics)[6]. The net effect is that from May through July the economy added only about 35,000 jobs per month on average[7], a pace that is essentially flat and “pre-recessionary” in appearance[8]. For comparison, job growth averaged around 300,000 per month in 2022 and over 120,000 per month in early 2025[2] – the sudden downshift to near-zero hiring is a dramatic change of trajectory.