July jobs report reveals unexpected loss of 23,000 jobs, missing economists' forecasts
The U.S. economy unexpectedly shed 23,000 jobs in July, undershooting economists' expectations and signaling the job market may be slowing.
By the numbers
Economists polled by FactSet forecast employers added 95,000 jobs in July.
Losses in local government education and retail dragged down last month's employment data, with the sectors losing 50,000 and 19,000 jobs, respectively. Healthcare, the main driver of payroll gains this year, added 22,000 jobs last month.
The Labor Department also revised down the May and June jobs numbers by a combined 103,000, a sign that hiring was weaker than previously reported.
"Hiring has gone into reverse — the economy actually shed jobs last month — and it turns out many of the jobs we thought were there in previous months never really existed," Nic Puckrin, markets expert and former Goldman Sachs analyst, said in an email.
Unemployment rate falls as labor force shrinks
The unemployment rate fell to 4.1% in July from 4.2% the previous month, but not for the right reasons.
Experts said the jobless rate dip last month was due to people exiting the workforce, rather than a boost in hiring. The labor force participation rate — which tracks the percentage of people working or actively looking for a job — fell to 61.4% in July, the lowest level since February 2021.
Part of that decline is due to a statistical quirk. A recent analysis from the Federal Reserve Bank of St. Louis found that a change in how the Labor Department calculates population data has created a large drag on the labor force participation rate.
Still, other factors help explain workers' retreat from the labor force.
"People leave the labor force because they don't see opportunities for themselves in it, and so they're not actively looking for a job," said Elise Gould, senior economist at the nonpartisan Economic Policy Institute.
People leaving their jobs to retire and stricter immigration policies could also be discouraging people from seeking work, Indeed Hiring Lab senior economist Cory Stahle told CBS News.
"We also know that the aging U.S. population will exert a gravitational pull on the participation rate over the next 5 to 10 years as baby boomers retire, suggesting the downward trend will continue," he said.
What the experts say
Hiring remains generally more muted than in the post-pandemic years, when the U.S. economy experienced an employment rebound. Kory Kantenga, the head of economics, Americas, at LinkedIn, described the job market as "slow," especially for young people.
"There's not a lot of action. Unemployment is holding steady, but we haven't seen hiring pick up meaningfully in years," he told CBS News before the release of Friday's jobs report.
July data from LinkedIn shows hiring and job postings remained essentially unchanged from June. At the same time, job-seeking intensity — measured by applications per applicant — increased, suggesting competition is increasing for a limited number of roles.
While hiring remains stagnant, layoffs recently hit their lowest level in two years, recent data shows. Separate data released Thursday shows weekly unemployment claims remain historically low. The four-week average of initial jobless claims dipped below 200,000 for the week ending Aug. 1, marking the first time it has fallen below that threshold since October 2022, according to PNC Economics.
"Although the hiring rate is low, the unemployment rate remains steady because layoffs are also low," Fed Governor Lisa Cook said during an event at the Anchorage Economic Development Corporation on Wednesday.
Americans with jobs are facing their own set of challenges. A new CBS News analysis of Census data found that while the typical American's wages have steadily increased since 2019, those gains have largely been offset by rapidly climbing consumer prices.
What does this mean for the Federal Reserve?
The unexpected job loss in July could ease pressure on the Federal Reserve to raise interest rates at its next meeting, which is scheduled for Sept. 15-16, Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management, said in an email. Inflation data expected next week will be the "deciding factor," she said.
"If those numbers come in hotter than expected, a cooler labor market may not be enough to quiet the calls for hikes inside the Fed, or lower expectations outside of it," Zentner said.
The central bank has held interest rates steady for five consecutive meetings. However, some Fed officials have signaled they are open to raising rates to tame inflation, which remains well above the central bank's 2% target rate. At the most recent Fed meeting in July, three Federal Open Market Committee members voted to raise rates, while nine voted to hold rates steady.
