Tariffs may have cost US economy thousands of jobs monthly, Fed analysis reveals

• Sectors with greater exposure to tariffs experienced larger declines in job growth compared to less-exposed industries
• The analysis estimates tariffs may have increased the unemployment rate by 0.1 percentage points, with the December 2024 rate at 4.2%
• Economists noted that tariff effects are occurring alongside other workforce factors including AI emergence, aging population, and reduced immigration

Summary: Fed Analysis Links Tariffs to U.S. Job Market Slowdown

A Federal Reserve Bank of Kansas City analysis reveals that tariffs may have cost the U.S. economy thousands of jobs monthly in 2025, contributing to a significant employment growth slowdown.

Key Findings:

Employment Impact:

• Monthly job growth declined from 170,000 in 2024 to just 75,000 through August 2025
• The economy could have added an estimated 19,000 additional jobs per month without tariff effects
• Tariffs may have increased the unemployment rate by 0.1 percentage points
• December unemployment stood at recent levels following a November rate of 4.5% (revised down from 4.6%, the highest since September 2021)

Analysis Methodology:

The Fed economists used sector import share as a proxy for tariff exposure, finding that industries with greater tariff exposure experienced sharper declines in job growth. The analysis compared current trends against the 2022-23 post-pandemic recovery average, with nearly all sectors showing weaker performance in 2025.

Policy Context:

The Trump administration's higher tariffs, implemented alongside other workforce pressures including AI emergence, aging populations, and reduced immigration, prompted three Federal Reserve interest rate cuts in September, October, and December as policymakers monitored the employment slowdown.

Market Implications:

The findings echo employment effects from 2018 tariffs, suggesting domestic firms are adding fewer jobs in response to trade barriers. While economists acknowledge "considerable uncertainty" around estimates and cannot rule out zero direct effect, the correlation between tariff exposure and slower job growth remains significant for investors monitoring labor market health and Fed policy direction.

Columbia Sportswear CEO Tim Boyle discussed tariff impacts on product pricing in related commentary.