WASHINGTON — U.S. job growth slowed sharply in the three months through July after government data showed substantial downward revisions to payroll gains in May and June, pointing to a labor market that has lost momentum.
Nonfarm payrolls fell by 23,000 in July, the Bureau of Labor Statistics said on Friday, after the agency revised May's gain down by 66,000 to 63,000 and June's gain down by 37,000 to 20,000. The combined revisions reduced employment gains for those two months by 103,000.
The revisions brought the average monthly job gain over the three months through July to 20,000, down sharply from an average of 77,000 in the three months through June, according to calculations based on the BLS data.
The July decline was the first monthly payroll contraction in five months and confounded economists' expectations for an increase of about 80,000 jobs. The unemployment rate nevertheless edged down to 4.1% from 4.2%, largely because the labor force shrank by 264,000, pushing the participation rate to 61.4%.
The weakness was concentrated in several sectors. Local government education employment fell by nearly 50,000, while leisure and hospitality lost 40,000 jobs and retail employment declined by about 19,000, according to the BLS. Private payrolls increased by 30,000, while health care added 22,000 jobs and construction employment rose by 22,000.
Economists cautioned that seasonal factors can make summer employment figures volatile, particularly around the end of the school year. Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets, said the latest weakness marked the third consecutive summer of unexpectedly soft labor-market data and described policymakers as broadly viewing the labor market as stable.
The slowdown could influence the Federal Reserve's interest-rate decisions. Financial markets reduced expectations for a September rate increase following the report, although policymakers remain focused on inflation as well as employment. The Fed last week kept its benchmark interest-rate target at 3.50%-3.75%.
The BLS said its next employment report, covering August, is scheduled for Sept. 4. The agency also plans to publish a preliminary annual benchmark revision to establishment-survey data on Aug. 28, with the final benchmark revision due in February 2027.
