Washington, Aug 1 (AP) US hiring is slowing sharply as President Donald Trump's erratic and radical trade policies paralyse businesses and raise doubts about the outlook for the world's largest economy.

US employers added just 73,000 jobs last month, the Labor Department reported Friday, well short of the 115,000 expected.

Worse, revisions shaved a stunning 258,000 jobs off May and June payrolls. And the unemployment rate ticked higher to 4.2% as Americans dropped out of the labour force and the ranks of the unemployed rose by 221,000.

“A notable deterioration in US labour market conditions appears to be underway,'' said Scott Anderson, chief US economist at BMO Capital Markets. ”We have been forecasting this since the tariff and trade war erupted this spring, and more restrictive immigration restrictions were put in place. Overall, this report highlights the risk of a harder landing for the labour market.'' Economists have been warning that the rift with every US trading partner will begin to appear this summer, and the Friday jobs report appeared to sound the bell.

“We're finally in the eye of the hurricane,” said Daniel Zhao, chief economist at Glassdoor. “After months of warning signs, the July jobs report confirms that the slowdown isn't just approaching—it's here.” US markets recoiled at the jobs report, and the Dow tumbled more than 600 points on Friday.

But President Donald Trump responded to the weak report by calling for the firing of Erika McEntarfer, the director of the Labor Department's Bureau of Labor Statistics, which compiles the jobs numbers. “I have directed my Team to fire this Biden Political Appointee, IMMEDIATELY,” Trump said on Truth Social. “She will be replaced with someone much more competent and qualified.” Trump questioned the big revisions, but they are a standard part of the monthly jobs report. The Labor Department revises its numbers as more data comes in. Particularly since COVID-19, businesses have taken longer to respond to the government's survey on hiring. As more data has come in later than in the past, the potential for large revisions has increased.

Revelations in the new data raise questions about the health of the job market and the economy as Trump pushes forward an unorthodox overhaul of American trade policy.

Trump has discarded decades of US efforts to lower trade barriers globally, instead imposing hefty import taxes — tariffs — on products from almost every country on earth. Trump believes the levies will bring manufacturing back to America and raise money to pay for the massive tax cuts he signed into law on July 4.

Mainstream economists warned that the cost of the tariffs will be passed along to Americans, both businesses and households.

That has begun.

Walmart, Procter & Gamble, Ford, Best Buy, Adidas, Nike, Mattel, Shein, Temu, Stanley Black & Decker, have all hiked prices due to US tariffs. Economists at Goldman Sachs estimate that overseas exporters have absorbed just one-fifth of the rising costs from tariffs, while Americans and US businesses have picked up the lion's share of the tab.

Trump has sowed uncertainty in the erratic way he's rolled the tariffs out — announcing, then suspending them, then coming up with new ones. Overnight, Trump signed an executive order that set new tariffs on a wide swath of US trading partners that go into effect on August 7, and that comes after a flurry of unexpected tariff-related actions this week.

“There was a clear, significant, immediate tariff effect on the labour market and employment growth essentially stalled, as we were dealing with so much uncertainty about the outlook for the economy and for tariffs,” said Blerina Uruci, chief U.S. economist for the brokerage T. Rowe Price.

Still, Uruci said the data suggests we could be past the worst, as hiring actually did pick up a bit in July from May and June's depressed levels.

“I'm not overly pessimistic on the US economy based on this morning's data,” she said, though she does think that hiring will remain muted in the coming months as the number of available workers remains limited due to reduced immigration and an ageing population.

“Because of immigration policy, labour supply growth has nearly ground to a halt,” said Guy Berger, senior fellow at the Burning Glass Institute, which studies employment trends. “So we're going to have very weak employment growth. And we look like southern Europe or Japan.” Still, with fewer workers available, the economy doesn't need to generate many jobs to soak up the unemployed. That could keep the unemployment rate from climbing much, Berger added.

Trump has sold the tariff hikes as a way to boost American manufacturing, but factories cut 11,000 jobs last month after shedding 15,000 in June and 11,000 in May. The federal government, where employment has been targeted by the Trump administration, lost 12,000 jobs. Jobs in administration and support fell by nearly 20,000.

Healthcare companies added 55,400 jobs last month – accounting for 76 per cent of the jobs added in July and offering another sign that recent job gains have been narrowly concentrated.

The department originally reported that state and local governments had added 64,000 education jobs in June. The revisions on Friday slashed those jobs to less than 10,000.

Those revisions also revealed that the US economy has generated an average of just 85,000 jobs a month this year, barely half last year's average of 168,000 and well below an average of 400,000 from 2021-2023 as the economy rebounded from COVID-19 lockups.

The weak jobs data makes it more likely that Trump will get one thing that he most fervently desires: A cut in short-term interest rates by the Federal Reserve, which often -- though not always -- can lead to lower rates for mortgages, car loans, and credit cards.

Fed Chair Jerome Powell and other Fed officials have repeatedly pointed to a healthy job market as a reason that they could take time to evaluate how Trump's tariffs were affecting inflation and the broader economy. Now that the assessment has been undercut, it will put more pressure on the Fed to reduce borrowing costs.

Wall Street investors sharply raised their expectations for a rate cut at the Fed's next meeting in September after the report was released.

On Wednesday, the Fed left its key rate unchanged for the fifth consecutive meeting and Powell signalled little urgency to reduce rates anytime soon. He said the “labour market is solid” with “historically low unemployment.” But he also acknowledged there is a “downside risk” to employment stemming from the slow pace of hiring that was evident even before Friday's weaker numbers.

The current situation is a sharp reversal from the hiring boom of just three years ago, when desperate employers were handing out signing bonuses and introducing perks such as Fridays off, fertility benefits and even pet insurance to recruit and keep workers.

The rate of people quitting their jobs — a sign they're confident they can land something better — has fallen from the record heights of 2021 and 2022 and is now weaker than before the pandemic.

Drees Homes, a homebuilder based outside Cincinnati in Fort Mitchell, Kentucky, has hired about 50 people over the past year, bringing its workforce to around 950. Pamela Rader, Drees' vice president for human resources, it's “gotten a little bit easier'' to find workers.

A couple of years ago, Rader said jobseekers were focused on getting more pay. Now, she said, they emphasise stable employment, a better work-life balance, and prospects for advancement. (AP) AMJ AMJ