The U.S. Bureau of Labor Statistics reported Friday that the economy lost 23,000 jobs in July, a figure that contrasted with analyst expectations of an 80,000-job increase. Despite the overall loss in roles, the unemployment rate declined slightly to 4.1% from 4.2% as the total number of people working or seeking employment decreased.
The July data follows a trend of slowing employment growth over the summer months. The Bureau of Labor Statistics (BLS), the federal agency responsible for tracking labor market data, also revised its previous estimates for May and June downward by a combined 103,000 jobs, indicating that the labor market was weaker in late spring than initially reported.
Job losses in July were primarily concentrated in local government education and the retail sector. Specific declines were noted in wholesale stores, hypermarkets, gas stations, and general merchandise shops. Additionally, average hourly earnings grew by 3.2% over the past year, reaching $37.62 for private non-farm workers, though this was lower than the 3.5% growth economists had anticipated.
The scale of the revision—103,000 fewer jobs in May and June than previously thought—suggests a more significant cooling of the economy over the last quarter. This data is expected to influence the Federal Reserve, the central bank of the United States, as it manages interest rates which currently sit between 3.5% and 3.75%. While high inflation of 3.5% often prompts the central bank to keep rates high or raise them, the loss of jobs may reduce the pressure to increase rates, as a weakening labor market can signal slowing economic growth.
What happens next depends on the Federal Reserve’s upcoming meeting in September. Kevin Warsh, the newly appointed chair of the Federal Reserve, has maintained a policy of providing limited forward guidance, leaving it unclear if the bank will maintain, raise, or lower interest rates. The central bank must weigh the 3.5% inflation rate against the July employment contraction when it makes its next interest rate decision next month.