Wall Street analysts are sharply divided over what is driving the abrupt cooling in US job creation reported this month. The Bureau of Labor Statistics said payrolls expanded by an average of just 35,000 over the past three months—the slowest pace since 2020—while July’s unemployment rate ticked up to 4.2%. One camp, including economists at Morgan Stanley, Barclays and Bank of America, argues the slowdown reflects a tighter supply of labour after President Donald Trump’s immigration crackdown, which has reduced the number of foreign-born workers in the labour force by about one million since the spring. If hiring is constrained mainly by scarce workers, they say, wage pressure should persist and the Federal Reserve could leave interest rates higher for longer. Rivals at Goldman Sachs, Citigroup and UBS counter that the weak payroll gains signal a broader drop in labour demand and warn that the economy may be losing momentum. That interpretation would raise the likelihood of the Fed beginning to cut rates as soon as its September meeting. With the data offering ammunition to both views, investors are watching forthcoming employment and immigration statistics for clearer evidence of whether supply or demand is at the heart of the hiring stall.