The U.S. economy unexpectedly lost 23,000 nonfarm jobs in July and both the labor force participation rate and unemployment rate also declined, according to data released Friday by the U.S. Bureau of Labor Statistics.
Although the private sector added 30,000 jobs in July, the public sector lost 53,000 jobs, producing a net loss of 23,000 jobs, the BLS data shows. This loss was in stark contrast to the Dow Jones forecast, which had predicted that employers would add 83,000 jobs in July.
Prior to July’s deceleration in hiring, the economy had been averaging a gain of 34,000 jobs per month over the past 12 months.
Some of the largest employment declines in July were in local government education (-50,000) and retail trade (-19,000), according to the BLS. Employment in financial activities continued to trend down in July (-14,000) and had lost 121,000 jobs since its peak in May of 2025.
The leisure and hospitality industry lost 40,000 jobs in July, but those numbers could be skewed by the conclusion of the World Cup tournament. From a statistical standpoint, the industry still employs about 16.9 million workers, so the 40,000 jobs represent 0.24% of the workforce.
Healthcare employment continued its upward trend in July (+22,000) but at a slower pace than its average monthly job gain (+36,000) during the past 12 months. Employment showed little change over the month in other major industries including oil and gas extraction, construction, manufacturing, wholesale trade, and social assistance, the BLS said.
Meanwhile, the unemployment rate dipped from 4.2% in June to 4.1% in July as the percentage of the working-age population that is either working or actively looking for a job fell to 61.4%. The monthly labor force participation rate is now at its lowest level in over five years.
The government also revised downward its previously released preliminary jobs data for May and June, saying the economy actually added 103,000 fewer jobs in those two months. May’s employment gain was revised downward to 63,000 instead of the previously reported gain of 129,000. June was revised downward to 20,000 instead of 57,000.
Workers’ pay also saw virtually no gain during July. Average hourly earnings increased by just 2 cents, bringing the 12-month average down to 3.2%.
The stock market was trading higher after the disappointing employment report was released Friday morning, with traders apparently betting that the Federal Reserve is now more likely to hold off on an interest rate hike at its September meeting because of a weaker job market.
The CME Group’s FedWatch tool now puts the probability of an interest rate hike at 43%. Yesterday, before the jobs report was released, the probability of a rate increase was 55%.
