June added 147,000 jobs to economy, increase in discouraged workers: CEI analysis

The jobs report for June showed an increase of 147,000 jobs in the economy, exceeding economists’ expectations. An increase in discouraged workers and a slowdown in cutting back federal bureaucracy could spell trouble for President Trump’s labor and deregulatory policy goals.

CEI Senior Economist Ryan Young:

“The unemployment rate remains a healthy 4.1 percent. However, there is an increase in discouraged workers, who are not counted in the unemployment rate. Workers are also becoming less productive due to tariffs and other policy uncertainty. This is why GDP shrank by 0.5 percent last quarter despite a stable unemployment rate.

“Labor force participation, which was 62.6 percent when President Trump announced his Liberation Day tariffs, is down to 62.3 percent. This is equivalent to roughly half a million people leaving the labor force. The total number of adults not in the labor force is up 1.1 million since then as well.

“Manufacturing employment stayed about the same. But manufacturing has contracted for four months in a row due to President Trump’s tariffs raising costs and lowering productivity.

“Economic commentators need to watch out for make-work bias. High living standards do not come from jobs. They come from what those jobs produce. The administration’s trade and some other policies might not affect the number of jobs that much, but they do make people less productive, and less able to afford a rising cost of living.”

CEI Research Fellow Sean Higgins:

“Friday’s jobs report shows that President Trump’s effort to shrink the federal government is losing momentum. Federal employment was down 7,000 in June, a decline from the 22,000 jobs eliminated in May. The federal workforce has shed 69,000 jobs overall since January. That’s a drop in the bucket compared to the estimated 3 million people, excluding active-duty military, that the federal government employs. The caveat is that federal workers on paid leave or receiving ongoing severance pay are still counted as employed, so the numbers may yet spike in the coming months.

“Still, for all of the headlines and drama over the last few months regarding government downsizing, the Trump administration has struggled to actually make a meaningful dent in the size of the federal bureaucracy. Elon Musk’s departure as head of the Department of Government Efficiency and the related turmoil have clearly hindered administration efforts. Meanwhile, public sector employment in general continues to grow, having added 73,000 new jobs in June overall due to gains at the state and local levels.”