U.S. Sheds 23,000 Jobs in July; Industry Economists Share Thoughts
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Nonfarm payroll employment fell by 23,000 in July, per an Aug. 7 release from the Bureau of Labor Statistics.
The unemployment rate dipped to 4.1%, propelled by individuals dropping out of the workforce.
Employment declined in local government, education and retail trade, but continued to trend up in health care.
The change in total nonfarm payroll employment for May was revised down by 66,000, from 129,000 to 63,000. The change for June was revised down by 37,000, from 57,000 to 20,000. Employment in May and June combined is 103,000 lower than previously reported.
“Wage growth at 3.2% fell behind the pace of inflation,” noted Mortgage Bankers Association Vice President and Deputy Chief Economist Joel Kan, CMB. “The weaker July employment data might provide a little breathing room for the Federal Reserve as it considers its next policy move, but inflationary pressures are expected to persist through the remainder of 2026 with no clear end in sight for the war in Iran. We anticipate that the Federal Reserve will raise the fed funds rate in early 2027, but any additional upside surprises to inflation are likely to bring that timetable forward.”
“Much of July’s weakness was concentrated in government education, where payrolls fell sharply at the end of the school year, which likely exaggerated the headline decline. Even so, the recent trends make clear that the labor market has lost some of its recent momentum,” said First American Senior Economist Sam Williamson. “That cooling also shifts the balance of risks for the Federal Reserve. Higher energy prices have recently revived concerns about inflation and raised the possibility of additional rate hikes later this year. A weaker jobs backdrop, though, shifts that calculation by giving policymakers more reason to weigh signs of labor-market softness alongside inflation risks, lowering the odds of further tightening.”
“For prospective home buyers, that could offer some relief. A lower risk of additional Fed tightening could help keep a lid on longer-term interest rates and mortgage rates, easing some pressure on affordability,” Williamson continued. “Slower hiring can also weigh on job mobility and consumer confidence, so the housing benefit is likely to be modest. Still, a cooler labor market that takes some pressure off borrowing costs would be a better backdrop for buyers than another leg higher in mortgage rates.”
