US Economy Loses 23,000 Jobs in July Amid Weaker Labor Market

The US economy shed 23,000 jobs in July, a surprise drop that contradicted market expectations. The unemployment rate fell to 4.1%, but this came at the cost of a decline in job growth.

The previous two months' payroll gains were revised sharply lower, with June's increase downgraded from 372,000 to 286,000 and July's decrease revised from 0 to 23,000. This suggests that the labor market may be weaker than previously thought.

The participation rate fell to a near 5-1/2-year low of 61.4% as another 264,000 people left the labor force. Wage growth was 0.1% from June and 3.2% from one year ago, while inflation was 3.5% in its most recent reading.

Financial markets priced in a lower chance of a September rate hike after the report, with futures odds falling to about 40%. This could provide some relief for the Federal Reserve, which had been widely expected to increase interest rates.