Congress should cancel its August recess and act on the warning in July’s jobs report. America needs legislative and regulatory action that turns rising investment and productivity into broader hiring, stronger workforce participation, and consistent 3% growth.
July’s jobs report is not proof of an economic downturn. It is a roadmap showing where America can gain ground.
The economy lost 23,000 jobs in July, while payroll gains for May and June were revised downward by a combined 103,000. The unemployment rate declined from 4.2% to 4.1%, but the labor force contracted by 264,000 people.
Nonfarm payroll employment declined by 23,000 in July, while payroll gains for May and June were revised downward by a combined 103,000. The unemployment rate declined from 4.2% to 4.1%, but the labor force contracted by 264,000 people.
These numbers deserve attention, not panic.
America is not starting from weakness. Consumer spending increased at a 3.2% annual rate during the second quarter. Real final sales to private domestic purchasers, grew 3.9% at an annual rate. Business investment in equipment surged 15.2% at an annual rate.
Nonfarm business productivity increased at a 1.4% annual rate during Q2 and 2.2% from a year earlier. Manufacturing productivity rose at a 1.9% annual rate as output increased 4.6%. Businesses are producing more, while investment is rising in productivity-enhancing equipment, software, and technology.
July’s report contained productive momentum. Private employers added 30,000 jobs. Construction gained 22,000. Manufacturing added 5,000, including 18,000 in durable-goods industries. Government employment declined by 53,000, pulling payrolls below zero.
Businesses are investing. Consumers are spending. Productive industries are expanding. Small businesses have generated 61% of net new jobs since 1995 and remain essential.
Yet hiring remains too narrow, and too many Americans are leaving the workforce. That progression remains incomplete.
The Trump administration and Congress have acted. The One Big Beautiful Bill increased tax certainty and permanently restored 100% first-year depreciation for qualifying business property. Regulatory and energy actions are removing barriers to production and growth. Those steps established the foundation. July’s report shows why America must build upon it now.
First, Congress should create a temporary Small-Business Payroll Growth Credit for employers with fewer than 50 workers. Businesses that increase total payroll above the prior-year level should claim part of that increase as a quarterly payroll-tax offset. The credit should apply only to genuine payroll growth sustained for at least 12 months, with caps and recapture provisions. For small businesses, it would reduce the cost and risk of expansion. For workers and families, it would mean more jobs, stronger wages, and opportunities to reenter the workforce.
Second, Congress should enact permanent, comprehensive permitting reform. Major projects should have one lead agency, one coordinated federal review, a firm two-year decision deadline, and a defined period for legal challenges. Faster decisions would move factories, housing, infrastructure, pipelines, transmission, critical-mineral projects, data centers, and refining capacity from planning to construction. Companies would gain certainty, workers would gain well-paying jobs, and families would benefit from supplies of housing, energy, and essential goods.
America needs greater refining capacity. Congress and the administration should establish a national objective of adding at least 500,000 barrels per day of domestic refining capacity over the next decade through expansions, modernization, reactivation, and economically justified new facilities.
Third, Congress should require a Growth and Jobs Test for every major federal regulation. Agencies should publish each rule’s cumulative effects on hiring, investment, productivity, business formation, and competition while demonstrating that less burdensome alternatives were considered. Compliance requirements should reflect business size, capacity, and risk. That would preserve necessary protections without allowing excessive costs to stop a small company from hiring its next worker, buying equipment, or competing with a larger corporation. Workers would gain opportunities, consumers more choices, and the economy stronger competition.
Fourth, Congress should tie federal workforce funding to measurable employment results. Employers should help determine which skills are taught, while apprenticeships, internships, and work-based learning become central to federally supported programs. Funding should follow job placement, higher earnings, and sustained employment, not enrollment or dollars distributed. Workers would gain skills connected to jobs, businesses qualified employees, taxpayers’ measurable value, and families’ pathways to higher incomes.
Monetary policy must reinforce this growth agenda. With hiring narrowing and workforce participation weakening, this is no time for the Federal Reserve to raise interest rates. Holding rates steady would avoid making homes and purchases more expensive to finance and support business investment and hiring.
Sustained 3% growth would raise household incomes, create jobs, strengthen the tax base, reduce the relative burden of the national debt, and help America withstand global shocks.
THE ECONOMY DIDN’T MISS. THE EXPERTS DID
July’s jobs report shows Washington must act. Congress should turn investment and productivity into tomorrow’s businesses, jobs, higher incomes, and opportunity.
Consistent 3% growth is within reach. Washington must help America achieve it.
Dan Varroney is an economic strategist, founder and CEO of Potomac Core, and author of Rethinking Economic Growth.