US Labor Market Posts First Loss: 23,000 Jobs Cut in July

The US labor market posted its first monthly loss in July: nonfarm payrolls fell by 23,000, according to the employment report the Bureau of Labor Statistics released on August 7. Economists surveyed before the release had forecast gains of 83,000 to 95,000 jobs, so the miss ran past a hundred thousand positions. It is the first month of payroll decline after a stretch of slowing hiring.

The unemployment rate that same month dropped to 4.1 percent from 4.2 percent, with roughly 6.9 million people out of work. The two figures move in opposite directions because they come from separate surveys: payrolls are measured through employers, while the unemployment rate comes from a survey of households.

Why did unemployment fall in a month with fewer jobs?

The drop in the rate is not a sign of hiring. The labor force shrank by 264,000 people in July, and anyone who stops actively looking for work no longer counts as unemployed. The labor force participation rate slid to 61.4 percent, the lowest in more than five years, while the employment to population ratio stands at 58.9 percent.

In its “Employment Situation” release for July, the Bureau describes both figures as showing “little change during the month and were also little changed from a year earlier.” That calm headline number masks what is happening underneath it.

In July, 1.8 million people had been out of work for longer than 27 weeks, or 25.5 percent of all the unemployed. Another 4.8 million were working part time for economic reasons, either because their hours were cut or because they could not find full time work. A further 476,000 had stopped looking for a job because they believed none was available to them.

Revisions erase 103,000 jobs

The revisions to earlier months carry more weight than the July figure itself. May’s payroll gain was revised down from 129,000 to 63,000, and June’s from 57,000 to 20,000. Together the two revisions stripped 103,000 jobs out of estimates that markets had already priced into their expectations.

With July’s decline added in, the three-month total falls to 60,000 jobs, an average of 20,000 a month. Revisions are a routine part of the process, since the Bureau keeps receiving reports from companies and government agencies after the initial release, but a correction of this size reshapes the picture of the entire summer for the US labor market.

Sectors: education and retail carry most of the decline

The losses are concentrated in a handful of industries:

• local government education: 50,000 fewer jobs
• retail trade: down 19,000
• financial activities: down 14,000

The financial sector is best read over a longer stretch. Employment there now sits 121,000 jobs below its May 2025 peak, meaning July’s drop is not an isolated month but the continuation of a trend running more than a year.

Healthcare is the only major sector still in positive territory, adding 22,000 jobs, 18,000 of them in ambulatory care. Even there the pace has slowed: over the previous twelve months, healthcare had been adding an average of 36,000 jobs a month. The number of workers on temporary layoff rose by 153,000, to 921,000.

Wages and the next report

Average hourly earnings in the private sector reached $37.62, two cents higher than the month before and up 3.2 percent from a year earlier. Production and nonsupervisory workers earned an average of $32.40 an hour, four cents more than in June. The average workweek held steady at 34.3 hours.

For the Federal Reserve, this mix of data complicates the decision ahead. A lower unemployment rate on its own eases the pressure to cut rates, while negative payrolls, downward revisions and a shrinking labor force point to demand for workers weakening faster than the headline rate suggests. The cost of dollar borrowing flows from there into exchange rates and lending rates well beyond the United States, so a release out of Washington does not stay a purely American story.

The next employment report, covering August, is due from the Bureau of Labor Statistics on September 4. It will carry the first revision of the July numbers, and going by the last two months, that revision is the part of the story markets risk writing off too soon.