WASHINGTON — The U.S. economy unexpectedly shed 23,000 jobs in July, the first monthly decline in payroll employment in five months, while the unemployment rate edged down to 4.1%, the Labor Department reported on Friday.
The result from the Bureau of Labor Statistics was well below economists' expectations for an increase of about 80,000 jobs and pointed to a weaker labor market than previously estimated. The report also showed that employment gains in May and June were revised down by a combined 103,000.
The unemployment rate fell from 4.2% in June to 4.1% in July, but the decline came as the labor force participation rate slipped to 61.4%. The number of unemployed people stood at about 6.9 million, little changed during the month, according to the BLS.
Employment losses were concentrated in several areas. Local government education employment fell by 50,000, while retail trade lost 19,000 jobs. Employment in financial activities declined by 14,000, continuing a downward trend that has reduced employment in the sector by 121,000 since its peak in May 2025.
Healthcare provided one of the few notable sources of job growth, adding 22,000 positions in July, although that was below its average monthly gain of 36,000 over the previous year. Employment changed little in major sectors including construction, manufacturing, transportation and warehousing, professional and business services, and leisure and hospitality.
Private-sector payrolls increased by about 30,000, according to the report, indicating that government employment declines accounted for a significant portion of the overall weakness.
Wage growth also remained moderate. Average hourly earnings for private-sector workers rose by 2 cents in July to $37.62 and were up 3.2% from a year earlier. The average private-sector workweek was unchanged at 34.3 hours.
The revisions to earlier months further weakened the recent employment trend. May's job gain was revised from 129,000 to 63,000, while June's increase was revised from 57,000 to 20,000.
The figures could influence expectations for Federal Reserve policy as officials weigh labor-market conditions alongside inflation. The BLS is scheduled to release its preliminary benchmark revision to employment data on Aug. 28, with the next monthly jobs report, covering August, due on Sept. 4.
