The lower-than-expected reading comes after what had appeared to be a surge in job creation in March and April, born of optimism around tax cuts, a respite from new tariffs, easing interest rates and lower inflation.

Since then, costs have jumped as oil shipments from the Persian Gulf have remained stalled, while the Trump administration has renewed its battle against imports. Job gains for April and May were revised down by 103,000, bringing the monthly average for 2026 to 60,000.

“We have a labor market that’s stable but stuck in second gear,” said Lydia Boussour, a senior economist at the consulting firm EY-Parthenon. “We still have an environment where those supply shocks are working their way through the economy, and a lot of uncertainty, and that will keep businesses cautious in hiring.”

The slack hiring comes while layoffs have remained consistently low, corporate profits are high and consumer spending has held up remarkably well even as expensive gasoline weighs on wallets. Job openings, the rate of hiring and the share of people quitting their jobs have stopped falling. Those indicators suggest that companies are not looking to slash payrolls at the moment.

But they have been investing heavily in artificial intelligence, which has subdued hiring for certain roles and weakened workers’ leverage to bargain for higher wages. Hourly earnings grew 3.2 percent over the year, the slowest pace since May 2021 and likely less than the rise in prices over the same period. July’s Consumer Price Index reading will be released on Aug. 12.

July’s data may disrupt the Federal Reserve’s relative comfort with the state of the labor market, as committee members weigh raising interest rates to combat war-driven inflation. The Fed will get another jobs report before meeting again in September.