The US economy added just 73,000 jobs in July, far below expectations. Making matters worse, May and June employment figures were revised down by a combined 258,000 positions.
The unemployment rate rose to 4.2%.
Over the past three months, job growth averaged just 35,000 per month, the weakest performance since the pandemic.
Long-term unemployment jumped by 179,000, reaching 1.8 million Americans who’ve been jobless for at least 27 weeks.
Labor force participation rate dropped to 62.2%, its lowest point in nearly three years. Even prime-age workers (25-54 years old) saw participation decline.
The weak headline number tells only part of the story.
Where jobs disappeared
Job gains were highly concentrated. Healthcare and social assistance carried the economy, adding a combined 73,000 positions, with healthcare alone contributing 55,000 new jobs. Retail trade added 15,700 jobs, while construction barely moved with just 2,000 new positions.
These gains masked significant losses elsewhere. Manufacturing cut 11,000 positions and professional and business services shed 14,000. The federal government eliminated another 12,000 jobs, continuing a months-long pattern of cuts that has sent shockwaves through universities and nonprofits reliant on federal funding. Since January, federal government employment has dropped by 84,000.
Without healthcare’s strong performance, July would have seen job losses.
Warning signs
Several indicators point to growing stress. Black Americans saw their unemployment rate spike to 7.2%, the highest since late 2021. New job seekers entering the market increased by 275,000. Meanwhile, those unemployed for over 27 weeks hit the highest level in over three years.
Fed pressure
This weak jobs report may add pressure on the US Federal Reserve to reconsider interest rates. Two Fed governors dissented at the latest meeting, arguing for rate cuts. Markets immediately priced in higher odds of a September rate reduction after the jobs data release.
The dramatic downward revisions and concentrated job growth suggest the labor market’s resilience may be fading.
