WASHINGTON — The U.S. economy unexpectedly lost 23,000 jobs in July, marking the first monthly decline in nonfarm payrolls in several months and signaling a broad slowdown in hiring as labor force participation weakened, according to data released by the Labor Department on Friday.
The Bureau of Labor Statistics said total nonfarm payroll employment fell by a seasonally adjusted 23,000 jobs during the month, sharply undershooting economists' expectations for a gain of about 80,000 to 83,000 jobs. The unemployment rate edged down to 4.1% from 4.2% in June, largely because fewer Americans participated in the labor force.
The report also revised employment figures for the previous two months substantially lower. Payroll gains for May and June were reduced by a combined 103,000 jobs, indicating labor market conditions had been weaker than previously estimated.
Despite the headline decline, employment trends varied across sectors. Healthcare, construction and information recorded modest gains, while leisure and hospitality posted significant losses. Government employment also declined, contributing to the overall drop in payrolls.
Average hourly earnings continued to increase at a moderate pace, although wage growth slowed from earlier in the year. Labor force participation slipped to 61.4%, reflecting a decline in the number of people either working or actively seeking employment.
The weaker-than-expected employment report prompted investors to reassess the outlook for U.S. monetary policy. Financial markets increased expectations that the Federal Reserve could refrain from further interest-rate increases if evidence of slowing labor market conditions continues to accumulate, although policymakers have continued to emphasize that inflation remains a key consideration.
Currency markets reacted swiftly following the release. The U.S. dollar weakened against major currencies, including the Japanese yen and the euro, as traders interpreted the employment data as reducing the likelihood of additional near-term monetary tightening.
The July report adds to signs that hiring momentum has moderated after a period of resilience in the U.S. labor market. Economists said upcoming employment and inflation reports will be closely watched for further evidence on whether the slowdown is temporary or reflects a broader cooling in economic activity.
The Bureau of Labor Statistics is scheduled to release its next monthly employment report in early September, providing the next official update on labor market conditions.
