US employers unexpectedly cut 23,000 jobs last month, and Bureau of Labor Statistics revisions shaved 103,000 jobs off payrolls in May and June. This was in sharp contrast with analyst expectations of an almost 100,000 spike in jobs in July.
However, the unemployment rate eased slightly to 4.1% in July, down from 4.2% in June, mainly due to more people leaving the labour market.
The July jobs numbers from the Bureau of Labor Statistics on Friday marked a sharp reversal for the domestic labour market and a political setback for President Donald Trump less than three months before his Republican Party seeks to keep full control of Congress in the midterm election.
Local public schools reduced 50,000 jobs last month, whereas 26,000 jobs were shed from restaurants and bars and 19,000 from retailers.
July’s unemployment rate was the lowest since June 2025, as 264,000 people dropped out of the labour market. The share of those working or looking for work fell to 61.4%, the lowest since February 2021.
The Trump administration, which has imposed massive tariffs in an attempt to create manufacturing jobs, noted that jobs were up 22,000 at construction companies and 5,000 at factories.
“The Trump industrial resurgence is on schedule. Manufacturing and factory construction jobs grew again in July even as government payrolls continued to significantly shrink,’’ said White House spokesman Kush Desai.
Hiring had rebounded this year from a lackluster 2025 in the face of the conflict in the Persian Gulf that has sent energy prices surging and put a strain on family budgets. Job growth had been solid, if unspectacular. Some businesses are having trouble filling vacancies, while others are using technology to replace human labour.
The rise of the ‘no hire, no fire’ economy
Americans who have jobs are enjoying unusual job security. Layoffs are low by historical standards. This is mainly due to companies being unwilling to risk giving up the staff they have, following the surprise labour shortages following the pandemic.
But Americans who have lost their jobs — or are seeking to enter the job market for the first time — are struggling to catch a break.
Economists have used the term “no hire, no fire” to describe the unusual job market conditions.
So far this year, employers are adding 61,000 jobs a month, up from 9,700 in 2025, the weakest outside a recession since 2002.
The United States does not need as many jobs as it used to to keep the unemployment rate from rising.
Trump’s immigration crackdown and the ongoing retirement of baby boomers mean fewer people are competing for work. So the “break-even’’ rate of monthly hiring, 155,000 in 2023-2024, has dropped, perhaps to nearly zero, according to a Federal Reserve study.
“There are just fewer people available to hire,’’ said Sal Guatieri, senior economist at BMO Capital Markets. For some, labour shortages translate into higher wages.
The payroll processor ADP reported Wednesday that people who changed jobs last month pocketed a 7% raise, the biggest year-over-year gain in almost a year and a premium over a 4.4% increase for workers who stayed where they were.
At the same time, companies have become more productive in recent years, using technology to do the work that humans used to do. “We are seeing companies produce more with their current staff,’’ Guatieri said. “So there’s less need to take on new workers.’’
Shortages of available workers and rising productivity, he said, “will keep the lid on the rate of hiring and monthly job growth.’’
Moreover, the outlook for hiring is clouded by the ongoing fighting in the Persian Gulf, which has pushed up energy prices and squeezed family budgets, and by the rise of artificial intelligence, which could either make workers more efficient and better paid — or take their jobs.
In a report out this week, researchers Ingrid Chen, Marianna Kudlyak and Riva Mikhlin of the Federal Reserve Bank of San Francisco found that landing a job has gotten tougher in the past couple of years — surprisingly so.
Normally, this deep into an economic expansion (it has been more than six years since the last recession), employers would need workers so badly that they would be taking chances on young people and on those with less education. Not this time.
“Instead of being pulled in, the pipeline into employment is shrinking such that the recovery is no longer reaching workers at the margins,’’ Chen, Kudlyak and Mikhlin write.
Moreover, the unemployed people who normally get back to work the fastest — those in their prime working years, ages 25 to 54, and with college educations, are struggling to find new jobs.
The San Francisco Fed researchers are not sure what is making the job search so tough.
They suspect it might have to do with the immigration crackdown, hiring slowdowns specifically at tech companies and government contractors, uncertainty over the direction of government policy or “early signals of broader labor market deterioration.”
