WASHINGTON, D.C.: The U.S. labor market lost momentum in July, with job growth slowing more than expected and major downward revisions to prior months adding to concerns about the strength of the economy. The data has renewed speculation that the Federal Reserve may cut interest rates as soon as September.

The Labor Department said on August 1 that nonfarm payrolls rose by just 73,000 last month, well below the 110,000 economists had forecast. June's job gain was revised down to 14,000, the weakest monthly increase in nearly five years. May's figures were also slashed, from 144,000 to just 19,000 jobs, resulting in a combined revision of 258,000 fewer jobs than previously reported.

"The labor market is not rolling over, but it is badly wounded and may yet bring about a reversal in the U.S. economy's fortunes," said Christopher Rupkey, chief economist at FWDBONDS. "The door to a Fed rate cut in September just got opened a crack wider."

July's hiring was once again concentrated in healthcare, which added 55,000 jobs. Social assistance roles increased by 18,000. However, federal government employment continued to decline, shedding another 12,000 jobs and bringing the total reduction to 84,000 since January. More cuts may be on the way following a Supreme Court ruling that gave the Trump administration the green light for broader federal layoffs, though some agencies have indicated they will hold off.

The unemployment rate rose to 4.2 percent in July, up from 4.1 percent in June. The increase was attributed in part to declines in the volatile household employment measure and a continued, though slower, exodus from the labor force.

Despite leaving interest rates unchanged earlier this week, the Federal Reserve may now have a more transparent case for easing. Fed Chair Jerome Powell described the labor market as "in balance" due to falling labor demand and supply, but he also acknowledged this shift could present a "downside risk."

Uncertainty around trade policy is compounding the issue. On July 31, President Donald Trump imposed sweeping tariffs on dozens of countries, including a 35 percent duty on Canadian imports, contributing to concerns about rising inflation and policy-driven economic strain.

Following the report, the dollar slipped, and U.S. Treasury yields dropped, as markets began to shift expectations back toward a possible rate cut in September. Earlier in the week, many had expected the Fed to delay easing until at least October.

The Bureau of Labor Statistics noted that the May and June revisions were "larger than normal" but did not offer a specific reason, attributing the changes to late-arriving data and seasonal adjustment recalculations.

In September, the Fed may receive further clarity when the BLS issues its annual benchmark revision, which could confirm that job growth over the past year was even weaker than payroll data had suggested.

The labor market has also been affected by structural changes. Reduced immigration due to the Trump administration's crackdown has limited the labor supply, and an acceleration of baby boomer retirements is adding to the demographic pressure.