US economy unexpectedly shed jobs in July

• Prior months were revised sharply downward, with May and June combined showing 103,000 fewer jobs than previously reported (May revised from +129,000 to +63,000; June from +57,000 to +20,000)
• Government sector shed 53,000 jobs in July, while private payrolls added only 30,000 jobs, well below the 78,000 estimate
• Average earnings growth slowed to 3.2% year-over-year, below the 3.5% estimate, while labor force participation declined to 61.4%, down 0.7 percentage points since January

Summary: US Economy Unexpectedly Sheds Jobs in July 2026

The U.S. labor market contracted unexpectedly in July 2026, according to the Bureau of Labor Statistics. The economy shed jobs during the month, significantly missing economists' expectations of 80,000 jobs added. However, the unemployment rate declined to 4.1%, below the forecasted 4.3%.

Key Data Points:

Private sector payrolls added only 30,000 jobs, well below the 78,000 estimate. Previous months saw substantial downward revisions: May was revised from +129,000 to +63,000 (down 66,000), and June from +57,000 to +20,000 (down 37,000). Combined, May and June employment figures were 103,000 jobs lower than initially reported.

Sector Performance:

• Construction: Lost 53,000 jobs, with June revised to show a 10,000 job loss
• Retail: Shed 19,000 jobs, driven by losses in supercenters (-21,000) and gas stations (-5,000)
• Financial Services: Lost 14,000 jobs, now 121,000 below its May 2025 peak
• Healthcare: Added 22,000 jobs, though slower than the 12-month average of 36,000
• Manufacturing: Gained 5,000 jobs, exceeding expectations

Labor Market Indicators:

Average hourly earnings grew 3.2% year-over-year, below the 3.5% estimate. Labor force participation declined to 61.4%, down 0.7 percentage points since January. Long-term unemployment (27+ weeks) held steady at 1.8 million, representing 25.5% of all unemployed workers.

Context:

The weak report comes amid elevated inflation and uncertainty surrounding the Iran war's economic impact, raising questions about potential Federal Reserve interest rate adjustments.