23,000 jobs disappear despite forecasts for fresh hiring, while downward revisions raise fresh concerns about the strength of America’s labour market ahead of the midterm elections……
The US labour market delivered an unexpected setback in July, with the world’s largest economy shedding 23,000 jobs and raising fresh questions about the strength of President Donald Trump’s economic agenda.
Data released Friday by the US Bureau of Labour Statistics showed that employment declined last month, a sharp reversal from expectations that employers would continue adding jobs.
Economists surveyed by Dow Jones Newswires and The Wall Street Journal had projected an increase of about 83,000 jobs in July.
The unemployment rate, however, edged down to 4.1 per cent.
The decline was partly linked to a shrinking labour force, with fewer people available for work as the United States contends with an ageing population and weaker net migration.
The figures come at a politically sensitive moment for Trump and the Republican Party, which is preparing for November’s midterm elections. The economy is expected to remain a central issue as Democrats seek to regain control of Congress.
Trump has made economic revival a major part of his second-term agenda, introducing policies aimed at boosting domestic manufacturing while tackling inflation.
But the latest employment figures could complicate that message, particularly if signs of weakness in the labour market persist.
The disappointing jobs report also puts renewed attention on the US Federal Reserve as policymakers weigh the competing risks of inflation and a weakening labour market.
A significant portion of July’s job losses came from local government education, where employment typically falls during the summer as teachers leave payrolls temporarily.
Even after accounting for that seasonal pattern, however, the overall numbers were considerably weaker than expected.
The BLS also revised employment figures for the previous two months downward by a combined 103,000 jobs, suggesting that the labour market had been losing momentum faster than earlier data indicated.
Job growth peaked in March before weakening over the following three months and eventually turning negative in July.
White House economic adviser Kevin Hassett played down the significance of the report, describing the survey behind the figures as “very, very noisy.”
The labour force participation rate also fell to its lowest level since the peak of pandemic-related shutdowns, helping explain why the unemployment rate remained relatively stable despite the deterioration in employment.
For the Federal Reserve, the figures present a difficult balancing act.
The central bank is tasked with maintaining maximum employment while keeping inflation around its two per cent long-term target. Inflation has remained above that goal for years, putting policymakers under pressure to keep price growth under control even as employment conditions soften.
The Fed kept interest rates unchanged at its most recent meeting, although three regional presidents dissented and supported a rate increase.
Chris Zaccarelli of Northlight Asset Management said the latest report could change the way markets view the Fed’s next moves.
“This morning’s report is a game changer in the sense that all of the recent focus has been on inflation, and this report highlights the risks that are embedded in the labour market as well,” he said.
Kathy Bostjancic, chief economist at Nationwide, said one weak employment report would not be enough to shift the Fed completely away from its inflation concerns.
“The soft labour market report should lower market expectations for a Fed rate hike in the coming months, but the inflation reports will be the key focus for Fed officials,” she said.
The weakness was spread across parts of the US economy.
Retail trade employment fell by 19,000 jobs in July, with warehouse retailers and general merchandise stores recording declines.
The financial activities sector also remained under pressure. Employment in the industry has fallen by 121,000 jobs from its peak in May 2025.
Healthcare remained one of the few areas providing meaningful support to employment. The sector added 22,000 jobs during July as demand for medical services continues to rise alongside the country’s ageing population.
However, even healthcare hiring slowed compared with its average monthly gains over the past year.
Another concern emerging from the report is the gap between wage growth and inflation.
Average hourly earnings increased by 3.2 per cent compared with a year earlier. With inflation running faster, however, the increase leaves workers with weaker purchasing power in real terms.
That combination of stubborn inflation and slowing employment could leave the Federal Reserve facing an increasingly difficult decision when it meets next month.
Diane Swonk, chief economist at KPMG, warned that the combination of persistent inflation and a weakening labour market would present one of the most difficult scenarios for policymakers.
“The worst combination for the Fed is if inflation remains sticky while the labour market weakens,” Swonk said.
“That would not take rate hikes off the table; it would make them more painful.”
The July figures therefore leave policymakers, investors and the White House watching the next round of economic data closely, particularly for signs that the labour market slowdown is temporary or the beginning of a broader deterioration.
