Catenaa, Friday, August 07, 2026- US employers unexpectedly cut jobs in July, and hiring in the earlier two months was revised lower, suggesting the labor market is weaker than expected.
Nonfarm payrolls decreased 23,000 last month following a combined 103,000 downward revision to the May and June figures, Bureau of Labor Statistics data showed Friday.
The unemployment rate fell to 4.1% as labor force participation continued to slide, and wage growth slowed.
The report suggests the labor market may be starting to falter amid rising prices and uncertainty from the Iran war, despite recent data showing strength in consumer spending and business investment.
The data could also prompt the Federal Reserve to delay interest-rate increases as officials weigh inflation against employment risks.
US stocks opened higher, and Treasury yields fell as investors reduced bets on a Fed rate hike in September. Still, upcoming reports on consumer prices, including data for July next week, could ultimately decide the Fed’s course of action next month.
The decline in jobs was driven by cuts in government, leisure and hospitality, and retail trade. Private-sector payrolls rose by 30,000 for a second month, led by healthcare and social assistance.
Local government employers shed nearly 60,000 jobs, almost entirely in education, which can be volatile in the summer as many teachers fall off payrolls before returning again as the school year begins. Federal government payrolls also fell.
Leisure and hospitality employment declined to the lowest level in almost a year as restaurants and bars shed staff, suggesting the FIFA World Cup that ended July 19 didn’t provide the boost to payrolls many forecasters had anticipated.
The report comes as high-profile companies announced layoffs throughout the month, including Microsoft, Uber Technologies and Visa.
Payrolls in the financial activities sector, a key employer of white-collar workers seen as among the most vulnerable to artificial intelligence adoption, fell to the lowest level in four years.
Manufacturing and construction payrolls, however, continued to climb. Many economists have pointed to the data-center buildout as a possible driver of demand for construction labor in 2026, even as homebuilding continues to be restrained by high interest rates.
The participation rate, the share of the population that is working or looking for work, fell to 61.4%, which, excluding the pandemic, was the lowest since the 1970s.
Among those between the ages of 25 and 54, known as prime-age workers, participation edged higher but remained near the lowest levels of the last few years.
Pay gains also came in below estimates. Average hourly earnings rose 3.2% from a year earlier, marking the slowest pace in more than five years. Economists are paying close attention to how labor supply and demand dynamics are impacting pay.
Purchasing power will also be a key issue heading into the November midterm elections, especially as the Iran war has further driven up the cost of living. While consumer sentiment rebounded last month, consumers’ views about their current financial situation remain below levels seen in recent years.
