The U.S. labor market took an unexpected step backward in July, with employers cutting jobs instead of adding them.
The economy lost 23,000 nonfarm jobs in July, according to the latest report from the U.S. Bureau of Labor Statistics. Economists had expected employers to add about 80,000 jobs.
The report also showed that previous job-growth estimates were much weaker than initially reported. June’s gain was revised down to just 20,000 jobs, from the previously reported 57,000. Revisions to May and June together reduced previously reported payroll growth by 103,000 jobs.
The unemployment rate actually fell from 4.2% to 4.1%, but that number doesn’t tell the whole story. The labor-force participation rate dropped to 61.4%, meaning fewer people were working or actively looking for work.
Job losses were concentrated in areas including local government education and leisure and hospitality, while private-sector employment increased by only about 30,000 jobs. Health care continued to add workers, and construction also posted gains.
Wage growth also remained modest. Average hourly earnings were up about 3.2% from a year earlier, another sign that the labor market is no longer growing at the pace seen during stronger periods of the recovery.
The weak report could also affect the Federal Reserve’s next decision on interest rates. Investors have already lowered their expectations for a September rate hike following the disappointing employment numbers, although inflation remains a major concern for policymakers.
For workers and job seekers, the latest numbers offer a reason to pay closer attention: the unemployment rate remains relatively low, but hiring has slowed significantly and earlier job gains were overstated.
