Hiring Comes to a Halt in July

Editor’s Note: President Donald Trump ordered the firing of Erika McEntarfer, the head of the U.S. Bureau of Labor Statistics, hours after the agency’s report covered below showed that hiring had slowed down significantly over the past three months. Trump nominated economist E.J. Antoni Aug. 11 to become the next commissioner for the agency.

U.S. employers added 73,000 jobs in July, much less than economists were expecting, according to the latest employment report from the U.S. Bureau of Labor Statistics (BLS).

The unemployment rate ticked up to 4.2%. In addition, downward revisions to job gains in May and June were abnormally large: a combined 258,000 lower than previously reported. May’s total was revised from 144,000 jobs added down to 19,000, and June’s total was reduced from 147,000 to 14,000.

“The report suggests that the labor market is significantly cooler than we had previously understood as manifested by the slowing of U.S. job growth in recent months, which is concerning given the highly uncertain economic environment,” said Andrea Medici, a labor economist at SHRM.

Laura Ullrich, director of economic research for North America at Indeed, said that the report “officially ripped the mask off the market.”

She added that “the underlying weakness that had been apparent just under the surface came into full view after major downward revisions showed the past few months of seemingly steady jobs growth to be basically nonexistent.”

Ullrich described the labor market at the start of the year as largely held up by a three-legged stool of job creation in health care, leisure and hospitality, and government hiring. With only the health care sector steadily adding jobs, it’s difficult to remain upright.

Evidence pointing to a weakening jobs market continues to pile up. BLS data shows fewer job openings, hiring at a one-year low, and a quits rate below the five-year average. Outside of the pandemic year in 2020, this year has been the weakest for job creation since the 2007-2009 financial crisis.

The labor market has gone from seeming to tread water to cooling more rapidly than previously thought, said Sam Kuhn, an economist at Appcast. “Interpreting the overall job growth figure has an important caveat due to our aging population and lower immigration levels,” he said.

That’s because the “breakeven rate,” or the number of jobs needed every month to keep the unemployment rate fixed, is slowing dramatically.

“Simply put, the level of hiring activity in the labor market is not enough to maintain our current unemployment rate, likely indicating a higher rate in the short term,” Kuhn said.   

Ger Doyle, regional president for North America at ManpowerGroup, said that real-time data shows that last month saw the lowest volume of open job postings since July 2021, with a 6% month-over-month drop in open roles and an 8% decline in new postings. Year-over-year, open postings are down 14%.

“Still, there are bright spots,” he said. “Year-to-date, new postings are up 2%, and total postings are up 1% compared to 2024. We’re also seeing strong hiring in health care, executive management, finance, research and development, retail, hospitality, and logistics.”

Doyle said that employers continue to remain cautious, but the question is whether businesses will re-engage — not just to maintain, but to grow.

Geno Cutolo, president of Adecco North America, said that despite the disappointing jobs report, many companies are still actively hiring, and “we expect momentum to build with the upcoming ‘September Surge’ and holiday season. Plans are already well underway at many employers, particularly in retail and customer service. We’re also seeing a shift toward more strategic hiring as organizations focus on building workforces positioned for long-term growth.”

The unexpectedly distressing jobs report will likely provide incentive for the Federal Reserve to lower interest rates when it next meets in September.

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Industry Breakdown

Health care added 55,000 jobs last month, above the average monthly gain of 42,000 over the prior 12 months. Federal government employment continued to decline in July (-12,000) and is down by 84,000 since reaching a peak in January. Notably, the tens of thousands of federal employees on paid leave or receiving ongoing severance pay are not counted as unemployed.

“Over the past year, the base of job growth has been narrowing,” Kuhn said. “That base further narrowed this month, as — outside of health care hiring — most industries were flat or contracted on the month.”

Ullrich said that the sectoral breakdown from the jobs report is especially striking, with private education and health services adding 79,000 jobs while other sectors — including professional and business services, manufacturing, and government — losing more than 10,000 jobs each.

“While the health care and social assistance sub-sector accounts for just 14.6% of total jobs in the economy, 48.8% of all employment growth in the U.S. has occurred in this sub-sector over the past year,” she said. “If your skills align with health care, education, or state and local government, it may be easier — which is not the same as easy — to still find opportunities in this job market. However, if your skills align more closely with manufacturing, financial activities, or trade and transportation, the reality may feel quite different. The increasing concentration of jobs in certain sectors and an outright contraction of jobs in many others does not bode well for the market going forward.”

Economists have been paying particular attention to changes in workforce supply. A decrease in immigration is constraining the number of people from abroad coming into the labor force, while the U.S. population is aging, boosting retirements.

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“Immigration policy is impacting the workforce, Kuhn said: “The labor force declined for the third month in a row — for the first time since 2011. Since April, the total civilian labor force has declined by 793,000, a drop rivaling the workforce decline seen during the Great Recession in the late 2000s.” 

Unemployment Ticks Up

The unemployment rate rose slightly to 4.2% from 4.1% in June. A more encompassing unemployment indicator that includes discouraged workers and those holding part-time positions for economic reasons rose to 7.9%, its highest level since March.

In addition, long-term unemployment is rising. Average weeks unemployed jumped to 24.1, the highest level since April 2022, while the level of those out of work for more than 27 weeks rose to 1.82 million, the most since December 2021.

“The average unemployment duration rose in July, a sign that while jobs are available, they are harder to secure,” Doyle said. “Combined with a narrowing ratio of openings to unemployed workers, the market has become more competitive and increasingly fragmented, leaving many job seekers feeling locked out amid slower hiring and a growing emphasis on in-demand skills.” 

Unemployment remains low, and layoff activity is still muted, Ullrich said. “But it’s less clear than ever how much longer those saving graces can last,” she added.

Wages Rise

Average hourly earnings grew 3.9% year-over-year, up from 3.7% the previous month.

“Average hourly earnings picked up, a reminder that the Federal Reserve faces a difficult balance to cut rates and support the job market when inflation remains above its 2% target,” said Glassdoor chief economist Daniel Zhao.