A surprise decline
The US economy lost 23,000 jobs in July, the Labor Department said Friday. The decline surprised economists, who had expected modest job gains. It is the first monthly drop in payrolls since the recent slowdown began.
The unemployment rate held steady at 4.1 percent. The report also revised down job estimates for the previous two months. Together, the numbers show a labor market that is cooling faster than many forecasters predicted.
Stock markets reacted quickly. The S&P 500 and Nasdaq slipped in early trading, while Treasury yields fell as traders raised bets on interest rate cuts. Analysts said the report changes the debate in Washington about the strength of the economy.
Where jobs disappeared
Losses were concentrated in retail, manufacturing and government services. Temporary help services also cut workers, a sign that employers are cautious about the months ahead. Some sectors still added jobs, including health care and leisure, but the gains were not enough to offset the losses.
Labor force participation slipped as well. That means fewer people are working or looking for work, which can weigh on long-term growth. Wage growth also slowed, easing one source of pressure on the Federal Reserve.
Small businesses reported weaker demand in surveys released this week. The combination of high borrowing costs and softer consumer spending has made many owners hesitant to hire. Economists said the trend could continue into the fall.
What it means for rates and politics
The report lands weeks before the November midterm elections. The White House said the economy remains resilient and pointed to low unemployment. Republican critics seized on the drop as evidence that administration policies are failing.
For the Federal Reserve, the weak report raises the odds of an interest rate cut later this year. Chair Kevin Warsh has said the Fed is data dependent, and markets now price in a cut at the next meeting. A decision is expected in September.
Economists warn that one month does not set a trend. But the downward revisions to earlier months suggest the slowdown has been underway longer than first thought. The next jobs report will show whether July was a one-off or the start of a broader pullback.