WASHINGTON — The U.S. economy unexpectedly shed 23,000 nonfarm jobs in July, the first monthly payroll decline in months, while the unemployment rate edged down to 4.1% as fewer Americans participated in the labor force, according to data released on Friday by the Labor Department.
The Bureau of Labor Statistics said July's payroll decline contrasted with economists' expectations for job growth. The agency also revised employment figures for May and June down by a combined 103,000 jobs, indicating the labor market had been weaker than previously reported.
The unemployment rate fell from the previous month despite the payroll decline because approximately 264,000 people left the labor force, pushing the labor force participation rate down to 61.4%, its lowest level in more than five years, according to the report. Average hourly earnings rose 3.2% from a year earlier, a slower pace than in June.
Job losses were led by declines in local government education and leisure and hospitality employment. Retail and financial activities also posted losses, while construction and manufacturing recorded modest gains, the Labor Department said.
Financial markets reacted by scaling back expectations that the Federal Reserve would raise interest rates at its September meeting. Treasury yields fell, the U.S. dollar weakened and Wall Street stocks advanced following the release of the employment data.
Economists cautioned that seasonal factors can affect July payroll data and said additional economic indicators, including upcoming inflation figures, will provide further insight into the strength of the labor market. The Bureau of Labor Statistics said the July employment figures remain subject to future revisions as more complete data become available.
