Recruiters and job seekers at a job fair in Chicago.

U.S. job growth looked solid in June, but the headline number hides a stark reality: Many private employers aren’t hiring anymore.

Weighed down by high interest rates, a federal crackdown on immigration and uncertainty over tariffs, more companies are deciding they are better off with a smaller head count.

Last month, businesses added 74,000 new jobs, an anemic number compared with previous months. Private-sector job growth fell to the lowest level since October 2024. Of the 147,000 total new jobs added in June, nearly half were in government, bolstered by a jump in state and local government jobs.

On top of that, more than half of private industries cut jobs in June, Labor Department data indicates—only the third time this has happened since April 2020. For most of the postpandemic period, the majority of industries were adding jobs.

Many employers say there are just too many question marks hanging over the economy to expand head count right now. Warby Parker this spring told investors it would slow the pace of its hiring and reduce other expenses to help its profitability.

American Vinegar Works, a six-year-old specialty-food company based in Worcester, Mass., is holding off plans to bring on an additional employee to fill orders, as well as sales staff, because of concerns about the economy.

“I just don’t know what’s happening,” said the founder, Rodrigo Vargas. “It makes me cautious.”

Warby Parker recently said it was slowing the pace of its hiring.

The company, which has two full-time and three part-time employees, is delaying planned investments in new equipment for a product launch. “Anything that is longer term, that would provide results in five or six months, we are being cautious about it,” he said.

While private employers still added jobs overall in June, the gains were smaller than in prior months and heavily concentrated in a handful of sectors. Healthcare and social assistance, leisure and hospitality and construction companies added 94,000 jobs in June, but they account for just 36% of all private, nonfarm employment. The remaining sectors, which include professional and business services, manufacturing and wholesale trade, among others, and account for almost two-thirds of private employment, cut 20,000 jobs in aggregate.

That heavy reliance on a handful of industries increases the risk that overall job growth will fall further in the coming months, said David Seif, chief economist for developed markets at Nomura. “It’s certainly a red flag,” he said.

Economists don’t see a quick turnaround. A weak labor market “will be a persistent issue in the second half of the year as uncertainty holds back firm hiring,” said Dante DeAntonio, senior director of economic research at Moody’s.

Companies across the economy have plans to trim head count in the coming months. In June, Procter & Gamble announced it would cut 7,000 jobs—or 15% of its nonmanufacturing workforce—to create “broader roles and smaller teams.” Microsoft said this past week that it plans to cut 9,000 workers, after eliminating 6,000 roles across its product and software development teams in May.

On Thursday, United Parcel Service said it planned to offer buyouts to its delivery drivers for the first time in its 117-year history. UPS decided to offer the buyouts because the company is navigating “an unprecedented business landscape” and reorganizing its network, a company spokesman said.

One factor behind the drop in hiring is the federal crackdown on immigration, economists said. Fewer immigrants mean fewer people looking for jobs, which makes it harder for companies to hire, particularly in such sectors as hotels, restaurants and building services.

“Industries that are more reliant on immigrants have seen slower job growth in recent months,” said Jed Kolko, a nonresident senior fellow at the Peterson Institute for International Economics. At the same time, the drop in immigration means fewer new jobs are needed to keep the unemployment rate steady.

Tariff uncertainty is weighing on manufacturers, which often get components and materials from abroad. Manufacturing employment fell in June for the second straight month, data from the Labor Department shows. The drop was particularly noticeable, Kolko said, in high-wage manufacturing sectors such as semiconductors and machinery, which did well in recent years.

Tobi Lütke of Shopify says AI will affect his hiring decisions.

Some employers are curbing hiring in anticipation that artificial intelligence can do the work instead. One of the most vocal has been Shopify Chief Executive Tobi Lütke, who in a staff memo this spring said the Canada-based e-commerce company wouldn’t make new hires unless managers could prove AI wasn’t capable of doing the job.

Longer term, more company bosses are warning that the technology could shrink corporate workforces altogether. “Artificial intelligence is going to replace literally half of all white-collar workers in the U.S.,” Ford Motor Chief Executive Jim Farley said in a recent interview with the author Walter Isaacson at the Aspen Ideas Festival.

“At large, we’re not really looking to grow our head count very dramatically,” Adobe Chief Executive Shantanu Narayen told investors last month. “We are finding a lot more efficiency. People are using AI to be more efficient within the enterprise.”

Businesses that are hiring are applying a high level of circumspection. At Splunk, an IT security company that was acquired by Cisco Systems last year, every new job has to be approved at the C-suite level, said Dustin Cann, a senior director of talent acquisition strategy and operations there. “The idea is to encourage people to be really, really thoughtful. If I know I need to get my chief people officer’s or CEO’s approval, it makes you think, do I really need it?” he said.

The slowdown in hiring is hitting young people and recent graduates particularly hard, but older job seekers are feeling it too.

Erin Gramley, who was a marketing executive at a Fortune 500 company before taking time out of the workforce to raise her children, has been looking for work for a few years. Lately, she said, “I’m definitely seeing fewer openings, and the openings you do notice are repeats.”

Gramley, who is 48 and lives in the Philadelphia area, has been expanding her search outside insurance, her prior industry. She has applied for marketing and project management jobs in healthcare, education and other sectors. “I’m thinking outside the box about where I can apply my background and skills,” she said. “But I’m really not having any luck besides short-term gigs like substitute teaching, anything where they just need bodies.”

Employers say they are seeing more applicants for every job opening, and they sense a new level of anxiety among job seekers.

“There’s just a fear and desperation in the candidate population that I haven’t seen in a very, very long time,” said Tom Lott, the head of talent acquisition at Berry Appleman & Leiden, a law firm in the Dallas area.