US employers unexpectedly cut 23,000 jobs in July, while the Labor Department revised May and June payroll estimates down by a combined 103,000 positions, according to Business-Today. Economists had forecast employers would add close to 100,000 jobs during the month, the report said. The employment report, released Friday, pointed to an abrupt weakening in the US labour market.
July job losses by sector
Job losses were concentrated across several industries in July, according to Business-Today. Local public schools eliminated 50,000 positions, restaurants and bars reduced payrolls by 26,000, and retailers cut 19,000 jobs. The Trump administration, however, highlighted gains in sectors it has sought to promote through its tariff policy: construction companies added 22,000 jobs and factories increased employment by 5,000.
| Sector | Jobs added/removed |
|---|---|
| Local public schools | -50,000 |
| Restaurants and bars | -26,000 |
| Retailers | -19,000 |
| Construction | +22,000 |
| Factories | +5,000 |
Labour force participation and the 'no hire, no fire' market
Despite the payroll decline, the unemployment rate fell to its lowest level since June 2025, according to Business-Today. The drop reflected shrinking labour force participation rather than stronger hiring: about 264,000 Americans stopped participating in the job market, causing the share of people either employed or actively looking for work to fall to 61.4%, the lowest reading since February 2021. The unemployment rate had declined to 4.2% in June, its lowest level in a year, and economists surveyed by data firm FactSet expected it to remain unchanged last month, the report said. During one week in July, first-time claims for unemployment benefits fell to their lowest level in more than five decades.
Economists characterise the current labour market as a "no hire, no fire" environment, according to Business-Today. People already in work continue to experience unusually strong job security, with layoffs remaining low compared with historical levels. Businesses, still mindful of the unexpected worker shortages that followed the COVID-19 lockdowns a few years ago, are reluctant to reduce their existing workforce. By contrast, those who have been laid off or are attempting to enter the workforce for the first time continue to face significant difficulty securing employment.
Hiring trends and the falling 'break-even' rate
Employers have created an average of 61,000 jobs per month so far this year, an improvement from 9,700 per month in 2025, which represented the weakest pace outside a recession since 2002, according to Business-Today. The US economy now requires fewer new jobs each month to prevent unemployment from increasing than it did previously, the report said. A smaller pool of available workers, resulting from the Trump administration's immigration crackdown and the continuing retirement of baby boomers, has lowered the threshold. According to a Federal Reserve study, the monthly "break-even" hiring rate, estimated at 155,000 during 2023-2024, may now have fallen to nearly zero.
White House spokesman Kush Desai said:
"The Trump industrial resurgence is on schedule. Manufacturing and factory construction jobs grew again in July even as government payrolls continued to significantly shrink."
Persian Gulf conflict and AI uncertainty weigh on outlook
The hiring outlook is being weighed down by the continuing conflict in the Persian Gulf, which has driven up energy costs and put additional pressure on household budgets, according to Business-Today. Employment growth had recovered this year following a subdued 2025 despite the conflict, and overall hiring has remained steady, though not particularly strong. While some employers continue to struggle to recruit workers for vacant positions, others have increasingly turned to technology to perform tasks previously handled by employees. The growing use of artificial intelligence has added further uncertainty, as it could either improve workers' productivity and earnings or replace their jobs, the report said.
The July report delivers unwelcome news for President Donald Trump less than three months before Republicans seek to retain complete control of Congress in the midterm elections, according to an AP report.
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