U.S. employers unexpectedly cut 23,000 jobs in July, while gains in the previous two months were revised sharply lower, potentially bolstering expectations that the Federal Reserve could cut interest rates in the coming months, according to an Investing.com report.
The unemployment rate technically fell as thousands of people left the labor force, meaning fewer people were actively seeking work.
The July jobs report from the Labor Department, released Friday, marked a sharp setback for the U.S. labor market and President Donald Trump ahead of the midterm elections, according to reports.
READ: The myth of the ‘free market’ in fossil fuels (
Forecasters had expected job creation to approach 100,000 last month.
According to The Associated Press, local public schools cut 50,000 jobs in July, while restaurants and bars cut 26,000 and retailers cut 19,000. The 4.1% unemployment rate was the lowest since June 2025, but it fell only because 264,000 people left the labor force last month. The labor force participation rate, which measures the share of people working or looking for work, fell to 61.4%, its lowest level since February 2021.
“We can’t really put lipstick on a pig here,’’ said Daniel Zhao, chief economist at the jobs website Glassdoor. “This is not a great report for July.’’
The Trump administration, which imposed massive tariffs to encourage manufacturing in the U.S., noted that jobs were up 22,000 at construction companies and 5,000 at factories.
“The Trump industrial resurgence is on schedule,” said White House spokesman Kush Desai. “Manufacturing and factory construction jobs grew again in July even as government payrolls continued to significantly shrink.’’
Investors are closely monitoring jobs data as they assess the outlook for Federal Reserve interest rates. Debate has centered on whether the central bank will raise borrowing costs later this year to curb energy-driven inflation pressures. Higher interest rates can, in theory, help limit price gains, but they also risk weighing on the labor market and broader economic activity.
READ: The leaking bucket: India’s GDP rises as investment slips away (June 5, 2026)
U.S. stocks rose following the jobs report, as investors bet that the weak reading will likely persuade officials not to bump up rates. U.S. government bond yields, which tend to move inversely to prices and can track rate expectations, declined.
“This is a pretty horrendous report,” analysts at Vital Knowledge said in a note. “The silver lining (in the immediate term) for stocks is that the implications of this report are very dovish for monetary policy, which should push yields lower, although the Fed will face a big dilemma if employment continues to weaken while inflation stays elevated.”