US Labor Market Contracts in July as Payrolls Fall by 23,000

The US labor market unexpectedly contracted in July, with nonfarm payrolls posting their first monthly decline in years. The Bureau of Labor Statistics reported a seasonally adjusted drop of 23,000 jobs in July, following a downwardly revised decline of 20,000 jobs in June.

Economists surveyed by Dow Jones had expected employers to add 83,000 jobs during the month, but instead saw broad-based job losses across several industries. Employment in local government education declined by 50,000 positions, while retail trade shed 19,000 jobs, with warehouse clubs and supercenters eliminating 21,000 positions.

However, health care remained one of the few bright spots in the labor market, adding 22,000 jobs during July. Average hourly earnings for all private-sector employees were little changed at $37.62, increasing by just 2 cents during the month and rising 3.2% from a year earlier.

The weak payroll report contrasts with recent analysis from the Bank of America Institute, which suggested hiring activity may have strengthened in July based on deposit account data. The employment growth was led by lower-income households, whose after-tax wage growth surpassed that of higher-income workers for the first time since December 2024.