Jobs numbers drop in July, May and June’s numbers revised downward: CEI analysis

The new jobs report brings bad news to the labor market, with a net loss of 23,000 jobs for July and a downward revision for both May and June. With economic uncertainty still gripping the nation, many employers have held back on hiring.

CEI Research Fellow Sean Higgins:

“Friday’s Labor Department report showing that 23,000 jobs were lost in July and revising downwards May and June’s reports by a combined 103,000 confirms that the economy is in a slowdown. Average monthly job gains over the last year have declined to just 34,000.

“The previous ‘no hire, no fire,’ economy has dropped the second half of the equation as employers, struggling to keep their margins up, have begun to shed workers again. The number of people on temporary layoffs increased by 153,000 in July.

“People are feeling the pinch of higher prices and cutting back on spending and travel, causing employers in retail trade and leisure & hospitality to cut back on hiring. The administration’s tariff policy is creating a serious drag on the broader economy by forcing up prices on everyday goods, which is in turn putting other spending out of reach for many people.

“Ironically, the one thing keeping the hiring numbers from being worse is the aging of the Baby Boomer population, which is boosting hiring in health care services.”

CEI Finance and Monetary Policy Analyst Steve Swedberg:

“The July jobs report makes the Fed’s next interest rate decision more complicated. The weak numbers and trend of downward revision seems to indicate that the labor market is weaker than previously believed. Those numbers could increase pressure on the Fed to lower the interest rate.

“At the same time, inflation risks have not disappeared. Although inflation has moderated from its 2022 peak, it remains above the Fed’s long-run 2 percent target. Uncertainty over tariffs, fiscal policy, energy markets, and global supply chains could keep price growth elevated.

“The Fed is faced with the task of balancing signs of slowing employment against the possibility that inflation could remain stubborn or reaccelerate. The latest jobs report may alter the Fed’s short-term calculations, but policymakers should remember that maintaining price stability remains the foundation for a healthy labor market over the long term.”

CEI Senior Economist Ryan Young:

“A weird thing in July’s employment numbers is that the unemployment rate improved even though the economy lost 23,000 jobs. The reason for this is that more workers are becoming discouraged and leaving the labor force. The labor force participation rate is now down to 61.4 percent, roughly where it was in 2020-2021during the COVID-19 pandemic. It has now decreased in every reading since November 2025, when it was 62.5 percent.

“Once again, the sector that gained the most jobs was healthcare, which is a safe harbor sector with fewer layoffs than manufacturing or startups. Smaller job gains appeared in sporting goods, musical instruments, hobbies, and other leisure activities on which unemployed people might spend their money.”