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July jobs slide
Employers cut 23,000 jobs in July, and the Labor Department revisions slashed 103,000 jobs from May and June payrolls, leaving the U.S. job market stalled and delivering a political setback to President Donald Trump three months ahead of midterm elections.
“Employers cut 23,000 jobs in July”
The unemployment rate fell to 4.1% but for the wrong reason, as thousands of people dropped out of the labor market so fewer people were competing for work, and the share of those working or looking for work fell to 61.4%, the lowest since February 2021.
The report also showed wage pressure easing, with average hourly pay up 3.2% last month from July 2025, the smallest year-over-year increase since May 2021, while local public schools cut 50,000 jobs in July and restaurants and bars cut 26,000.
In the same data, the Labor Department reported that women lost 32,000 jobs last month, accounting for all the job losses in July, while men lost 5,000 over the past 12 months.
Against the Federal Reserve backdrop, the Fed kept rates unchanged at its meeting last week but three officials dissented in favor of a rate hike, and the July jobs numbers were expected to complicate decision-making for the inflation fighters at the central bank.
Fed debate and reactions
Heather Long, chief economist at Navy Federal Credit Union, called the release “a bleak jobs report,” saying “The U.S. labor market is stalling again and that is going to make the Federal Reserve’s job harder and life for job seekers rough.”
Daniel Zhao, chief economist at Glassdoor, said, “We can’t really put lipstick on a pig here,” and added, “This is not a great report for July.”
Markets reacted by taking a September rate hike off the table, with the odds of a September rate hike falling to about 40% after Friday’s jobs numbers were released, according to NBC News.
The Guardian framed the same data as a weaker picture of the labor market than past data indicated, noting that July’s job losses were concentrated in local government education, with 50,000 jobs lost, and retail, which lost 19,000.
Reuters described the broader policy implication as reassurance that the labor market remained resilient, saying the Labor Department’s employment report was expected to show the unemployment rate unchanged at 4.2% last month even as economists anticipated the labor force participation rate rebounded after declining to more than a five-year low in June.
What’s at stake next
The stakes for policymakers are tied to the Fed’s divided stance on inflation, with the AP noting that policymakers at the Federal Reserve were divided over whether to start raising interest to combat inflation that has exceeded the 2% target for more than five years.
“The U.S. central bank last week left its benchmark overnight interest rate in the 3.50%-3.75% range”
Reuters said next week’s inflation data could sharpen the debate on the near-term monetary policy outlook, and it also pointed to the Fed’s last move, where the central bank left its benchmark overnight interest rate in the 3.50%-3.75% range while three members dissented.
Quartz reported that the July jobs report pushed traders’ expectations away from a rate hike in September, and it said the S&P 500 rose 0.3% while the Nasdaq Composite rose 0.9% and the Dow Jones Industrial Average ended up 67 points, or 0.1%.
In the same market reaction, Quartz said the price of federal funds futures now shows that most traders expect no change in the target rate of 3.50% to 3.75% when policymakers meet in September, and it cited a shift from Thursday when futures markets had priced in a 55% probability of a quarter-point rate hike.
For workers and households, the report’s wage and labor-force signals are central, with AP saying average hourly pay was up 3.2% and unemployment fell to 4.1% only because 264,000 people dropped out of the labor market last month, while NBC News highlighted that the participation rate in July was the lowest since February 2021.
