US employers unexpectedly shed 23,000 jobs last month, while downward revisions by the Labor Department erased a further 103,000 positions from payroll estimates for May and June. Economists had been forecasting that employers would add close to 100,000 jobs during the month.The employment report released by the Labor Department on Friday pointed to an abrupt weakening in the US labour market. This delivers unwelcome news for President Donald Trump less than three months before Republicans seek to retain complete control of Congress in the midterm elections, according to an AP report.
Decoding US job losses
Job losses were concentrated across several industries in July. Local public schools eliminated 50,000 positions, restaurants and bars reduced payrolls by 26,000, while retailers cut 19,000 jobs.Even though the unemployment rate fell to its lowest level since June 2025, the decline reflected shrinking labour force participation rather than stronger hiring. About 264,000 Americans stopped participating in the job market, causing the share of people either employed or actively looking for work to fall to 61.4%, the lowest reading since February 2021.The Trump administration highlighted gains in sectors it has sought to promote through its tariff policy, noting that construction companies added 22,000 jobs and factories increased employment by 5,000.“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.Employment growth had recovered this year following a subdued 2025 despite the conflict in the Persian Gulf, which has fuelled higher energy prices and increased pressure on household finances. Overall hiring has remained steady, though not particularly strong. While some employers continue to struggle to recruit workers for vacant positions, others have increasingly turned to technology to perform tasks previously handled by employees.People already in work continue to experience unusually strong job security. Layoffs remain low compared with historical levels as businesses, still mindful of the unexpected worker shortages that followed the COVID-19 lockdowns a few years ago, are reluctant to reduce their existing workforce.During one week in July, first-time claims for unemployment benefits fell to their lowest level in more than five decades. The unemployment rate had declined to 4.2% in June, marking its lowest level in a year, and economists surveyed by data firm FactSet expected it to remain unchanged last month.
“No hire, no fire” market
By contrast, those who have been laid off or are attempting to enter the workforce for the first time continue to face significant difficulty securing employment.The current labour market has led economists to characterise it as a “no hire, no fire” environment.Employers have created an average of 61,000 jobs each month so far this year, an improvement from 9,700 a month in 2025, which represented the weakest pace outside a recession since 2002.The US economy now requires fewer new jobs each month to prevent unemployment from increasing than it did previously. A smaller pool of available workers, resulting from the Trump administration’s immigration crackdown and the continuing retirement of baby boomers, has lowered the threshold. According to a Federal Reserve study, the monthly “break-even’’ hiring rate, estimated at 155,000 during 2023-2024, may now have fallen to nearly zero.The hiring outlook is also being weighed down by the continuing conflict in the Persian Gulf, which has driven up energy costs and put additional pressure on household budgets. At the same time, the growing use of artificial intelligence has added further uncertainty, as it could either improve workers’ productivity and earnings or replace their jobs.
