US Economy Unexpectedly Shed 23,000 Jobs in July
The loss reverses June's gain of 57,000 jobs, even as the unemployment rate ticked down to 4.1%.
The U.S. economy unexpectedly lost 23,000 jobs in July, according to the federal government's monthly jobs report, a sharp reversal from the 57,000 jobs added in June.
The unemployment rate fell slightly, from 4.2% in June to 4.1% in July, the Bureau of Labor Statistics said. Unemployment remains low by historical standards.
The weak July figure departs from the largely resilient performance of the labor market so far in 2026, a stretch that has coincided with a historic oil shock that drove up fuel prices and raised supply-chain costs for a range of other goods.
A government report issued last week showed a steeper-than-expected slowdown in gross domestic product over the three months ending in June, suggesting strain in the underlying economy during the early months of the war with Iran.
Even with the July decline, the U.S. added an average of 92,000 jobs per month over the first half of 2026, BLS data showed. That pace marks an improvement from an average of about 7,000 jobs lost per month over the second half of 2025.
The Iran war drove up gasoline prices and pushed inflation to a three-year high in May. A preliminary peace agreement in June offered some relief, but a burst of on-again, off-again fighting in recent weeks has sent crude prices higher again.
The combination of elevated inflation and a resilient labor market has raised the chances of an interest rate increase, futures markets show. Investors put the odds of a quarter-point hike next month at about 56%, according to the CME Group's FedWatch Tool, a measure of market sentiment.
The Federal Reserve held interest rates steady at its meeting last week, but central bankers appeared divided. Three of the 12 members of the Fed's policymaking board voted in favor of a rate hike, the largest number of dissenters casting ballots in the same direction since 2016.
A rate increase could risk slowing hiring and economic growth in the coming months as companies face higher borrowing costs.
The benchmark rate stands between 3.5% and 3.75%, well below a recent peak reached in 2023 but far above the near-zero rate set at the outset of the COVID-19 pandemic.
Fed Chair Kevin Warsh, who took over the central bank this summer, has repeatedly vowed to bring inflation down.
"The committee remains resolute -- you've heard this before -- that we will deliver price stability," Warsh told reporters in Washington, D.C., last week.
This article was produced with the assistance of artificial intelligence (AI), in accordance with our editorial policy.