The U.S. Labor Department said on Friday that non‑farm payrolls fell by 23,000 in July, a surprise reversal after months of steady job gains. The unemployment rate edged up to 3.8%, the highest level since early 2022, prompting analysts to reassess the strength of the labour market.
The drop comes after the economy added 187,000 jobs in June, well above the 150,000 forecast that many economists had set for July. Economists had expected a modest increase, not a loss, as the summer hiring season usually lifts retail and hospitality employment.
A weaker payroll report reduces the pressure on the Federal Reserve to continue raising interest rates. With inflation still above target but showing signs of easing, the Fed has been watching the jobs data as a key gauge of economic overheating. The unexpected loss may give policymakers room to pause or adopt a more cautious stance at their upcoming meeting.
The decline mainly affected service‑sector workers, especially in leisure, hospitality and retail, where seasonal hiring slowed. Wage growth also cooled, with average hourly earnings rising only 0.2% in July, down from 0.4% in June.
Economists will watch the next jobs report and the Fed’s policy statement for clues on whether the labour market is entering a broader slowdown or simply correcting after a period of rapid hiring. The data will also influence equity markets, which have rallied on expectations of a softer monetary stance.