WASHINGTON — U.S. employers unexpectedly cut 23,000 jobs in July, marking a sharp deterioration in the labor market and prompting fresh questions about the strength of the world's largest economy, government data showed on Friday.
The decline in nonfarm payrolls reported by the U.S. Bureau of Labor Statistics was well below economists' expectations for job growth and followed substantial downward revisions to employment in the previous two months. Payrolls for May and June were revised down by a combined 103,000, according to the Labor Department.
The July decline was driven in part by a 50,000-job drop in local government education and a 19,000 decline in retail employment. Financial activities also shed jobs. Those losses offset gains in parts of the private sector, including health care, which added about 22,000 positions.
The report showed the unemployment rate edging down to 4.1% from 4.2%, but the decline did not reflect stronger hiring. The labor force participation rate fell to 61.4%, its lowest level since February 2021, as about 264,000 people left the labor force.
Wage growth also moderated. Average hourly earnings rose 3.2% from a year earlier, according to the report, while employment growth has remained subdued compared with the pace seen during much of the post-pandemic recovery.
The weak figures add to evidence that employers have become more cautious about hiring. Separate data from payroll processor ADP showed private-sector employers added 44,000 jobs in July, below expectations and down from a revised 95,000 increase in June.
The July figures also complicate the outlook for the Federal Reserve, which is weighing labor-market conditions alongside persistent inflation in setting monetary policy. The weaker employment data could influence expectations for the central bank's next policy decisions, although officials have emphasized that employment and inflation indicators will both remain important.
The Labor Department's revisions underscored the uncertainty surrounding the recent employment trend. With the July decline and lower estimates for May and June, recent job growth has been considerably weaker than previously reported. The next monthly employment report, covering August, is scheduled to provide the next official update on U.S. payrolls and unemployment.
