US Labor Market Weakening in July: Jobless Rate Edges Down as Employers Cut Positions

The US labor market weakened unexpectedly in July as employers cut jobs and revised payroll figures for the previous two months sharply lower. The Labor Department reported a decline of 23,000 nonfarm payrolls last month, the first decrease in five months. Economists surveyed by Reuters had expected an increase of 80,000 jobs after June's previously reported gain of 57,000.

The government also revised May and June payrolls down by a combined 103,000 jobs, further softening the recent employment picture. The unemployment rate edged down to 4.1% from 4.2% in June due to 264,000 people leaving the labor force, pushing the labor force participation rate down to 61.4%, its lowest level since February 2021.

Despite some caution against interpreting the report as evidence of a sudden deterioration in the labor market, economists noted that summer hiring data has repeatedly been distorted by seasonal adjustment challenges linked to the end of the school year.

Certain sectors saw declines, including local government education employment falling by 49,600 jobs and leisure and hospitality employment dropping by 40,000 jobs. On the other hand, healthcare added 22,000 jobs, while construction gained 22,000 and manufacturing employment increased by 5,000.