The US unexpectedly shed jobs in July and revisions halved gains in the prior two months, suggesting the labor market is weakening in the face of uncertainty spawned by rising energy costs linked to the Mideast Gulf war.
The US unexpectedly lost 23,000 non-farm jobs in July, the Labor Department reported. That compared with a median average of about 80,000 job gains expected by economists surveyed by Trading Economics.
Job gains in June were revised down to 20,000 from an initially reported 57,000, with May revised lower to 63,000 from an initially reported 129,000, for combined downward revisions of 103,000.
"Looking ahead, we expect businesses to remain cautious about hiring in response to higher energy prices and uncertainty about how AI will affect staffing needs," Pantheon Macroeconomics said in a note.
Total nonfarm employment averaged growth of 34,000/month for the 12 months prior to July.
Average hourly earnings increased by 3.2pc in the 12 months to July, slowing from 3.4pc in June. The unemployment rate ticked lower to 4.1pc in July, the lowest since June last year, from 4.2pc the prior month.
Retail trade lost 19,000 jobs in July, including 5,000 losses at gasoline stations and fuel dealers. Financial activities lost 14,000 jobs, and is down by 121,000 since a recent peak in May 2025. Health care added 22,000 jobs.
Government jobs lost 53,000, partly reflecting lost teaching jobs as the school year ended.
Following the report, odds of a quarter point Fed rate increase at the September meeting fell to 44pc in the CME's FedWatch tool from 55pc the prior day. The Fed has signaled it might hike rates to bring down inflation but signs of mounting labor market weakness could prompt it to hold longer.
The report "is another nudge for the Fed to keep policy on hold for an extended period as inflation stemming from higher oil prices, tariffs and the AI buildout fades," Oxford Economics said in a note.
Manufacturing added 5,000 jobs while construction added 22,000 jobs. Mining and logging shed 2,000 jobs. Transportation and warehousing added 9,700. Leisure and hospitality lost 40,000.
The labor force participation rate, which tracks those employed and those actively seeking work, ticked lower to 61.4pc, the lowest since the Covid pandemic. The lower rate reflects rising retirements and discouraged workers.
