The U.S. labor market lost momentum in July, with nonfarm payrolls declining by 23,000, sharply missing expectations for an increase of 83,000 jobs. The latest figure follows a revised 20,000 drop in June and points to a broader slowdown in hiring.
The unemployment rate nevertheless edged down to 4.1%. That decline came alongside another drop in labor force participation, which fell to 61.4%, its lowest level in more than five years.
Recent revisions also paint a weaker picture of employment growth. May’s final figure was cut to 63,000 jobs, 66,000 below the previous estimate. As a result, the average monthly gain over the past year has fallen to just 34,000 jobs.
Local government education accounted for the largest decline in July, shedding 50,000 positions. Retail employment fell by another 19,000, while financial activities lost 14,000 jobs.
Healthcare continued to add jobs, but at a slower pace than usual. The sector gained 22,000 positions during the month, well below its 12-month average of 36,000.
Wage growth also remained subdued. Average hourly earnings rose by only 2 cents in July, while annual wage growth slowed to 3.2%, below the 3.5% increase economists had expected.
Taken together, the figures point to a cooling U.S. labor market, with hiring losing pace, fewer people participating in the workforce and wage growth coming in below expectations.