The US labor market appeared to make steady progress during the first half of the year, but there are growing signs that job growth is losing momentum.

The July jobs report is set to be released at 8:30 a.m. Eastern Time on Friday and is expected to show a net gain of 115,000 jobs a significant slowdown compared to Junes 147,000. The unemployment rate is also projected to rise to 4.2% from 4.1% the previous month, according to consensus estimates from FactSet.

Data from the US Bureau of Labor Statistics (BLS) shows the US economy added between 102,000 and 158,000 jobs monthly in the first half of the year. These figures are generally considered healthy and align with the so-called break-even point where enough jobs are added to keep up with labor force growth and maintain unemployment stability.

However, excluding the pandemic-induced recession in 2020, the average monthly job gain of 130,000 from January to June is the weakest since 2010, when the US was still recovering from the Great Recession.

Heather Long, chief economist at Navy Federal Credit Union, told CNN: We are increasingly relying on a very small part of the economy to generate any job growth. There just arent jobs right now regardless of AI or tariffs.

She added that hiring has weakened across most sectors, with businesses largely refraining from bringing on new workers due to uncertainty surrounding Trumps volatile trade war and tariff policies.

Elizabeth Renter, chief economist at NerdWallet, wrote earlier this week: When companies cant predict the economy and therefore their operations they tend to wait until more clarity is available. In todays environment, that predictive clarity changes week by week, keeping labor expansion stuck in limbo.

Additionally, many workers are reluctant to switch jobs due to dim prospects, leading to a labor market characterized by stagnation in job mobility rather than the healthy churn typically seen in a strong economy.

Latest Data Highlights Job Loss Trends

Recent federal data confirms this cooling trend. The Job Openings and Labor Turnover Survey (JOLTS) showed a drop in job vacancies in June, with the hiring rate falling to a one-year low. Meanwhile, the quits rate remained below its five-year average.

Other indicators suggest layoffs havent accelerated dramatically, despite a surge in layoff announcements this year largely due to Trump administration cutbacks to federal agencies.

While initial jobless claims a leading layoff indicator remain low, continuing claims have stayed flat at 1.946 million, close to their highest level since November 2021.

The US Department of Labor reported Thursday that initial claims rose slightly to 218,000 last week, up from 217,000 the week prior, while continuing claims held steady near a four-year high.

Looking ahead, a report from Challenger, Gray Christmas showed 62,075 job cuts were announced in July, up 29% from June.

Senior VP Andrew Challenger said: Were seeing the impact of federal budget cuts led by the Department of Government Efficiency on nonprofits, healthcare, and government sectors. He added that AI was behind more than 10,000 layoffs last month, while tariff concerns impacted nearly 6,000 jobs this year.

Unemployment dipped in June, but that coincided with a shrinking labor force and a drop in participation rates.

The unemployment rate remains a key economic indicator, but due to major immigration-related shifts, its relevance has become more mathematical than meaningful.

A June analysis by Wells Fargo economists found that foreign-born workers regardless of legal status accounted for about three-quarters of the labor force growth since February 2020. Recent efforts to curb unauthorized immigration are now contributing to a contracting labor pool.

Healthcare and Education Lead Job Growth

While job growth often slows in summer or fiscal year-end periods, the US labor market also faces deeper structural challenges. Most job gains are concentrated in a few sectors.

Heather Long said: The labor market is frozen outside of healthcare and education. Thats a real tragedy for anyone trying to get a job.

The average duration of unemployment rose to 23 weeks in June, while the share of long-term unemployed (27 weeks or more) climbed to 23.3% nearing a three-year high, according to BLS data.

In June, healthcare, social assistance, and state and local governments which together account for less than 15% of total employment contributed 94% of all new jobs, per BLS figures.

Economists also flagged possible distortions in local government job estimates for June (which showed an 80,000-job increase). Education jobs usually decline in summer, but this years dip was smaller, leading seasonal adjustments to register a sharp rise.

Healthcare, social services, and leisure and hospitality are expected to be the primary engines of job growth in July.

Meanwhile, the private-sector diffusion index which measures the percentage of industries adding jobs came in at 49.6 in June. A reading below 50 means more industries lost jobs than gained.

Return of a K-Shaped Economy

Although some tariff-induced price hikes have appeared online and in stores (and partly in inflation data), the bigger labor market impact has been the uncertainty they created.

In Heather Longs view, tariff-related uncertainty tops the list of job market constraints, followed by post-pandemic rebalancing and trailing distantly the effect of artificial intelligence.

While wages continue to outpace inflation, recent developments have led the Federal Reserve to pause its tightening and pushed the economy back into a K-shaped pattern where the poor struggle while a small wealthy minority drives growth.

People are really hurting, said Long. And if the labor market weakens further, that could worsen existing strains like rising household debt.

She concluded: Theres simply no hiring not for white-collar or blue-collar workers. Hopefully, this will change if we get clarity on tariffs by summers end and a rate cut in September.