Key facts
- U.S. nonfarm payrolls decreased by 23,000 jobs in July.
- The unemployment rate fell to 4.1% in July.
- The labor force participation rate dropped to 61.4%, a near 5-1/2-year low.
- Payrolls for May and June were revised downward by a combined 103,000 jobs.
- Financial markets reduced the probability of a Federal Reserve rate hike in September.
The U.S. economy unexpectedly shed jobs in July, with nonfarm payrolls for the prior two months revised sharply lower. The Labor Department's Bureau of Labor Statistics reported a decrease of 23,000 jobs last month, contrary to economists' expectations of an 80,000 rise. Payrolls for May and June were also revised down by a combined 103,000.
The unemployment rate fell to 4.1% from 4.2% in June, primarily because 264,000 people left the labor force, pushing the participation rate to a near 5-1/2-year low of 61.4%. This decline in participation challenges the narrative of a robust labor market.
Job losses were concentrated in local government education, retail trade, and financial activities. Healthcare employment saw an increase, but at a slower pace than the previous year. Construction and manufacturing sectors remained largely unchanged.
This weak jobs report has led financial markets to reduce the probability of a Federal Reserve interest rate hike in September to 43.9% from 57% prior to the data release. Analysts suggest that while the jobs report may ease pressure on the Fed, upcoming inflation data will be crucial in determining future monetary policy.
Last year's significant downgrades to the May and June payroll data led to President Donald Trump's dismissal of the BLS commissioner, Erika McEntarfer, whom Trump accused of manipulating the data without evidence.