WASHINGTON — The U.S. unemployment rate fell to 4.1% in July from 4.2% in June, even as employers unexpectedly cut payrolls, highlighting a labor market that is losing momentum while the pool of available workers continues to shrink.
Nonfarm payroll employment fell by 23,000 in July, the Labor Department's Bureau of Labor Statistics said on Friday, marking the first monthly decline in employment since February. Economists had expected employment to increase.
The unemployment rate declined despite the job losses as the labor force contracted. The labor-force participation rate fell to 61.4% from 61.5%, according to the report. About 264,000 people left the labor force during the month, meaning they were no longer working or actively seeking employment.
The July figures also showed that employment growth in earlier months was weaker than initially reported. Payroll gains for May and June were revised down by a combined 103,000, adding to evidence that hiring has slowed more sharply than previous estimates suggested.
The decline in payrolls was concentrated in several sectors. Leisure and hospitality employment fell by about 40,000, while local government education also recorded a substantial decline. Healthcare and construction added jobs, partially offsetting losses elsewhere.
Average hourly earnings rose modestly in July, with wage growth slowing to about 3.2% from a year earlier, according to the employment report.
The combination of falling unemployment and weak job creation presents a mixed picture for the Federal Reserve as policymakers assess the outlook for inflation and employment. Financial markets reduced expectations for an interest-rate increase in September following the report, although the jobs data alone do not determine the central bank's policy decision.
The latest figures contrast with earlier official data showing a 4.2% unemployment rate in June, when the labor force had already declined and employment fell on a household-survey basis.
The next U.S. employment report, covering August, is scheduled for release by the Bureau of Labor Statistics in September.
