The U.S. shed 23,000 jobs in July, the government said in a surprising monthly report after steady gains earlier this year.
The Bureau of Labor Statistics reported big drops in leisure and hospitality employment, government and retail, while employment continued to “trend up” in health care but not at a slower pace than usual, given the last year.
The unemployment rate slipped slightly, to 4.1% from 4.2%, mainly because the labor participation rate fell to 61.4%, the lowest reading in over five years. The participation rate is the share of Americans 16 or older who are working or looking for work.
Forecasts had expected roughly 80,000 added jobs in July, up from 57,000 in June but down from the 92,000 average across the first half of the year.
Instead, the government reported a loss, reversing the 2026 trend of steady gains.
The government reported an unexpected drop days after President Trump visited Las Vegas on Wednesday to trumpet progress and combat poor perceptions of the economy.
“More Americans are working in the United States right now than at any moment in the history of our country,” Mr. Trump told supporters. “The economy is the greatest economy by far.”
Rep. Brendan Boyle, Pennsylvania Democrat and ranking member of the House Budget Committee, said the economy might be booming for “Trump’s billionaire donors.”
“For everyone else, Trump’s tariff taxes and disastrous Iran war are raising costs, slowing growth and hurting the job market,” he said.
Job gains were lackluster in 2025, as employers eased off a post-pandemic hiring frenzy and worried about factors such as new tariffs.
There had been signs of a rebound earlier this year.
The July report has implications for the Federal Reserve, which sets benchmark interest rates for borrowing.
Central bankers cut interest rates last year because they were worried about sluggish job growth.
With job gains steady, the Fed had been squarely on stubborn inflation.
Forecasters increasingly expect the Fed to increase rates by 0.25% at its September meeting.
The lackluster jobs report might force central bankers to reconsider a rate increase.
Stock futures surged after the jobs report Friday because investors figured the Fed would be less likely to raise interest rates.
CME Fedwatch, an online tracker, put the probability of a rate increase at 40%, down from 55% before the jobs report.
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