U.S. employers cut 23,000 jobs in July, the Bureau of Labor Statistics said on August 7, missing consensus forecasts that called for gains of roughly 83,000 positions. The unemployment rate ticked down to 4.1%, but the drop came alongside a shrinking labor force rather than a hiring surge.
Key Takeaways
- U.S. employers cut 23,000 jobs in July, the first monthly loss since February, far below the roughly 83,000 gain economists had forecast.
- The unemployment rate fell to 4.1% in July, but labor force participation dropped to 61.4%, its lowest level since February 2021.
- May and June job gains were revised sharply lower, to 63,000 and 20,000 respectively, from initial estimates of 129,000 and 57,000.
- Health care added 22,000 jobs in July while local government education lost 50,000, retail trade lost 19,000, and financial activities lost 14,000.
- Average hourly earnings rose 3.2% year-over-year to $37.62, trailing the 3.5% annual rise in consumer prices recorded in June.
The report points to a labor market losing momentum faster than earlier data suggested, with downward revisions to spring hiring figures and a labor force participation rate at its lowest point since February 2021. Together, the numbers complicate the Federal Reserve’s task of balancing inflation control against a softening job market, since wage growth is now trailing price increases.
July Job Losses Mark a Turning Point
July was the first month since February this year that the U.S. economy shed jobs overall, based on figures the Bureau of Labor Statistics released on August 7. It also marked the first time in 2026 the unemployment rate fell to 4.1%, down from 4.2% in June and from a three-month stretch holding at 4.3%.
The numbers for May and June got worse in hindsight. May’s job gains were revised down to 63,000 from an original 129,000, and June’s estimate dropped to just 20,000 from 57,000. That pattern of repeated downward revisions suggests the economy has been cooling for months longer than the initial monthly snapshots indicated.
Health Care Carries Nearly All the Job Growth
Health care added 22,000 jobs in July, the only industry to post a notable gain. Even that number represents a slowdown, since it sits below the sector’s average monthly gain of 36,000 over the trailing 12 months.
Kory Kantenga, LinkedIn’s head of economics for the Americas, said hiring outside health care has stalled out. “This is not a labor market that’s reaccelerating despite speculation to the contrary earlier this year,” Kantenga said. Local government education lost 50,000 jobs after showing little net change over the prior year, while retail trade shed 19,000 positions and financial activities lost 14,000.
| Sector | July Change |
|---|---|
| Health care | +22,000 |
| Local government education | -50,000 |
| Retail trade | -19,000 |
| Financial activities | -14,000 |
Fewer Workers Are Even Looking for Jobs
The labor force participation rate fell to 61.4% in July, its lowest reading since February 2021 and down from 61.5% in June. A falling participation rate alongside a falling unemployment rate is a warning sign rather than good news, because it usually means people are giving up the search rather than finding work.
“With job opportunities remaining scarce, more workers are exiting the labor market entirely,” said Nicole Bachaud, a ZipRecruiter labor economist, in a note to USA TODAY. That dynamic helps explain why the jobless rate improved even as the broader hiring picture weakened.
Paychecks Are Losing Ground to Inflation
Average hourly earnings on private, nonfarm payrolls rose 2 cents to $37.62 in July, a 3.2% increase over the past 12 months. That trails the 3.5% year-over-year rise in consumer prices recorded in June, meaning workers’ paychecks are not keeping pace with the cost of living.
The Consumer Price Index report due August 12 will show whether that gap widened or narrowed in July. Until then, the wage data adds another data point to a labor market where job creation, hours, and pay are all decelerating at once, a trend confirmed in figures the Bureau of Labor Statistics released on Friday.
What the Numbers Signal for the Months Ahead
Other measures of the labor market echo the same slowdown. Labor Department data released August 4 showed the quits rate, layoffs, and job openings barely changed in June, reinforcing what economists have called a low-hire, low-fire standoff between employers and workers. LinkedIn data showed the number of applications per job seeker on the platform rose in July, a sign that landing a job remains difficult even for active searchers.
Glassdoor’s Employee Confidence Index fell to a record low in July, with only 43.5% of employees reporting a positive six-month business outlook for their employer. Glassdoor chief economist Daniel Zhao said the pattern reflects deeper anxiety than the headline question implies, adding that even employed workers question their next raise or promotion. “Clearly, employees don’t feel like the current job market is working for them,” Zhao said.
A separate signal came from Challenger, Gray and Christmas, which found that job cut announcements from U.S.-based employers fell 27% from June to the lowest monthly total in two years in July, while announced hiring plans rose 47% from June to their highest level since 2022. That split points to an economy where fewer people are being fired but few new roles are opening up either, a standoff that leaves both job seekers and the Federal Reserve waiting for the next data release to see which direction breaks first.
FAQs
Why Did the Unemployment Rate Fall If the Economy Lost Jobs?
The unemployment rate dropped to 4.1% mainly because the labor force participation rate fell to 61.4%, its lowest level since February 2021. When people stop looking for work, they are no longer counted as unemployed, which can push the rate down even as hiring weakens.
Which Industries Lost the Most Jobs in July?
Local government education lost 50,000 jobs, retail trade lost 19,000, and financial activities lost 14,000. Health care was the only major sector to post a notable gain, adding 22,000 jobs.
How Much Were the May and June Jobs Figures Revised Down?
May’s job gains were revised down to 63,000 from an original estimate of 129,000, and June’s estimate dropped to 20,000 from 57,000. The repeated downward revisions suggest the labor market has been cooling for longer than initial reports indicated.
Are Wages Keeping up With Inflation?
No. Average hourly earnings rose 3.2% over the past 12 months to $37.62, which trails the 3.5% year-over-year increase in consumer prices recorded in June. The Consumer Price Index report due August 12 will show whether that gap changed in July.
What Does the Challenger, Gray and Christmas Report Show About Layoffs and Hiring Plans?
Announced job cuts from U.S. employers fell 27% from June to their lowest monthly total in two years in July. At the same time, announced hiring plans rose 47% from June to their highest level since 2022, suggesting fewer firings but still limited new hiring.
What Is the Low-hire, Low-fire Labor Market Economists Keep Mentioning?
It describes a standoff where employers are neither laying off large numbers of workers nor hiring aggressively. Labor Department data released August 4 showed the quits rate, layoffs, and job openings barely changed in June, reinforcing this pattern.
How Are Workers Feeling About the Job Market Right Now?
Glassdoor’s Employee Confidence Index fell to a record low in July, with only 43.5% of employees reporting a positive six-month outlook for their employer. Chief economist Daniel Zhao said even employed workers worry about promotions, raises, and their prospects if laid off.
