WASHINGTON — The U.S. economy unexpectedly shed 23,000 jobs in July, the Labor Department reported on Friday, while revisions showed hiring in the previous two months was substantially weaker than initially estimated, adding to evidence of a cooling labor market.
The decline in nonfarm payrolls, the first in five months, contrasted with economists' expectations for an increase of about 80,000 jobs, according to a Reuters poll. The Bureau of Labor Statistics said employment fell in local government education and retail trade, while healthcare continued to add jobs.
The unemployment rate edged down to 4.1% from 4.2% in June. The decline, however, came alongside a reduction of 264,000 people in the labor force, pushing the labor-force participation rate down to 61.4%, its lowest level since February 2021. The number of unemployed people fell by 178,000 to about 6.9 million.
The BLS revised May payroll growth down by 66,000 jobs to 63,000 and June growth down by 37,000 to 20,000. Together, the revisions reduced previously reported employment gains for May and June by 103,000 jobs.
Local government education employment fell by about 50,000 in July, while retail employment declined by 19,000. Financial activities lost 14,000 jobs. Healthcare employment increased by 22,000, construction added 22,000 and manufacturing employment rose by 5,000, according to the BLS.
Private-sector payrolls increased by 30,000, according to Reuters' analysis of the data, suggesting the overall decline was concentrated in government employment and several volatile sectors. Leisure and hospitality employment fell by 40,000, including a decline of 26,100 jobs at restaurants and bars.
Average hourly earnings rose 3.2% from a year earlier, slowing from 3.4% in June, while the average private-sector workweek was unchanged at 34.3 hours. Household employment fell by 87,000, and the number of people working part time for economic reasons rose by 123,000 to 4.8 million.
The weak employment figures prompted financial markets to reduce expectations that the Federal Reserve would raise interest rates at its September meeting. The Fed kept its benchmark interest-rate target at 3.50%-3.75% last week, while inflation remains a key consideration for policymakers.
The BLS said its next Employment Situation report, covering August, is scheduled for Sept. 4. It also plans to publish a preliminary annual benchmark revision to employment data on Aug. 28.
