The U.S. labor market weakened in July, with nonfarm payrolls down 23,000 and downward revisions cutting another 103,000 jobs from May and June. Although the unemployment rate edged lower to 4.1%, the decline reflected a smaller labor force rather than stronger hiring, as overall participation fell to its lowest level since early 2021. July marked the 7th monthly job loss over the last year and a half.
Wage growth also cooled, with average hourly earnings rising 3.2% year-over-year in July to $37.62, down from 3.4% in June and the slowest pace of 2026. Despite the slowdown, wage gains continue to outpace inflation, consistent with productivity-supported real wage growth.
National Employment
According to the Employment Situation Summary reported by the Bureau of Labor Statistics (BLS), total nonfarm payroll employment decreased by 23,000 in July, following a downwardly revised gain of 20,000 in June. Revisions to prior months were broadly negative again this month. The change for May was revised down by 66,000, from a preliminarily reported +129,000 to +63,000, while the change for June was revised down by 37,000, from a preliminary +57,000 to +20,000. Combined, these revisions subtracted 103,000 jobs from previously reported totals, compared with the 74,000 downward revision reported in the prior month.
Job growth in 2026 has moderated further. Through July, monthly payroll gains have averaged 61,000 on the current data vintage, down from the 92,000 pace reported through June, reflecting both July’s soft print and the downward revisions to May and June. This compares with an average of just 10,000 per month in 2025 and 122,000 per month in 2024. Over the past 12 months, total nonfarm employment has grown by 316,000 in total, a considerably slower pace of expansion than earlier in the cycle.
The unemployment rate declined to 4.1% in July from 4.2% in June. The decrease was driven by a shrinking labor force rather than stronger hiring. Over the month, the number of unemployed persons fell by 178,000 to 6.9 million, while the number of employed persons declined by 87,000. Combined, the civilian labor force contracted by 264,000 in July.
Meanwhile, the labor force participation rate—the proportion of the population either looking for a job or already holding a job—fell 0.1 percentage point to 61.4% in July. This marks the lowest level since February 2021 and remains well below its pre-pandemic level of 63.3% recorded at the start of 2020. Among prime working-age individuals (aged 25 to 54), the participation rate rose 0.1 percentage point to 83.4%, partially reversing June’s sharp 0.6-point decline and suggesting that the drop in labor force participation in July was not widespread.
Industry-level results were mixed in July. Employment declined in local government education (-50,000) and retail trade (-19,000), while financial activities continued to trend down (-14,000). Health care employment continued to increase (+22,000), although at a slower pace than its average monthly gain over the prior 12 months. The July release also showed an increase in temporary layoffs, with the number of people on temporary layoff rising to 921,000.
Construction Employment
Employment in the overall construction sector rose by 22,000 jobs in July, following a gain of 5,000 in June. Within the industry, residential construction employment edged up by 2,100, its first monthly increase in four months, while non-residential construction added approximately 20,000 jobs.
Residential construction employment stood at 3.3 million in July, including 914,600 workers employed by builders and remodelers, down from 915,100 in June, and 2.3 million residential specialty trade contractors.
The six-month moving average of job gains for residential construction employment remains negative, reflecting an average monthly loss of approximately 5,350 jobs and declines in four of the past six months. Over the last 12 months, residential construction has shed a net of 44,200 jobs, marking the seventeenth consecutive month of year-over-year decline. Despite these losses, residential construction employment remains 1,281,200 positions above its post-Great Recession low, with that cushion widening modestly from 1,279,100 in June as July’s small gain offset part of the prior months’ losses.
Meanwhile, the unemployment rate for construction workers fell to 4.6% in July on a seasonally adjusted basis, down sharply from 6.2% in June. A year earlier, the construction unemployment rate stood at 4.2%. Despite the month-to-month volatility, the year-over-year comparison still points to modestly softer conditions for the trades than a year ago.
