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By Hugh Cameron
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President Donald Trump has been dealt a fresh economic blow after the Labor Department reported an unexpected decline in employment last month.
On Friday, the Bureau of Labor Statistics (BLS) published its monthly Employment Situation Summary, revealing that the economy lost 23,000 jobs in July. This compares with forecasts that predicted job gains of 80,000 and marks a decline from a 20,000 increase in June. Meanwhile, the unemployment rate inched down to 4.1 percent from 4.2 percent, owing to ongoing shifts in the overall structure of the labor force.
This marks the second month of underwhelming employment readings. June's had originally come in below expectations, with a reported increase of only 57,000 jobs that was revised lower on Friday. Prior to this, economists had seen some growing strength in the labor market as job gains significantly exceeded the forecasts of analysts for three consecutive months.
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Why This Report Matters
Jobs had taken a backseat to inflation in the Federal Reserve's calculus, with Fed Chair Kevin Warsh having highlighted employment as exhibiting "solid growth."
"Job gains have kept pace with the workforce, and the unemployment rate has changed little," Warsh said following last week's meeting of the Federal Open Market Committee, at which it opted to leave rates unchanged.
"Inflation remains elevated relative to the Committee's two percent goal," he added. "The Committee remains resolute. You've heard this before, but we will deliver price stability."
Nevertheless, employment figures still form one half of the central bank's dual mandate, and the past two months' weaknesses mean it can not devote all efforts toward addressing price increases. And while unemployment remains low by historical standards, a slowdown in hiring and downward revisions to past months' data will likely fuel criticism from Democrats and concerns from voters about Trump's stewardship of the U.S. economy.
“This morning’s report is a game changer in the sense that all of the recent focus has been on inflation and this report highlights the risks that are embedded in the labor market as well,” Chris Zaccarelli, chief investment officer for Northlight Asset Management, told Newsweek. “Before today, many were expecting that the Fed had no choice but to raise rates in order to fight stubbornly high inflation, because the job market was so strong, but this report shows that isn’t the case.”
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What the Report Showed
According to forecasts from analysts ahead of the release, unemployment was expected to remain flat at 4.2 percent—compared to 4 percent when Trump returned to office last January. The economy was also expected to add 80,000 new jobs, which would have marked an improvement from June, but still fallen shy of longer-term historical norms.
“Even softened with seasonal caveats, the headline number is a huge bust," James Bentley, director at the financial education platform Financial Markets Online, said. “The median expectation was for the US economy to add 80,000 jobs last month. For it to have crunched into reverse was a shock, and a sign that America’s jobs market is far weaker than thought."
However, Bentley said that a further decrease in the unemployment rate to 4.1 percent meant the country's jobless rate was "now safely in benign territory."
The BLS noted losses in retail trade and financial activities in July, with the former losing 19,000 jobs and the latter seeing employment fall by 14,000. However, health care—long a reliable engine of job creation—"continued its upward trend" with the addition of 22,000 jobs.
Meanwhile, employment in manufacturing—a perennially challenged industry that the administration has treaty as a priority—increased by 5,000 in July following an 11,000-job gain in June.
"Employment showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; construction; manufacturing; wholesale trade; transportation and warehousing; information; professional and business services; social assistance; leisure and hospitality; and other services," the BLS said.
Participation again declined in July—to 61.4 percent from 61.5 percent—part of a long-running trend that has pushed the share of Americans either employed or looking for work to its lowest level since early 2021.
Friday's report also contained major revisions to previous months' data, further dashing hopes that the labor market was mounting a strong rebound after a weak 2025.
As well as June's revision to 20,000 jobs from 57,000, the change in total nonfarm payroll employment for May fell to 63,000 from the originally reported 129,000.
"With these revisions, employment in May and June combined is 103,000 lower than previously reported," the BLS said.
What Was Trump Hoping For?
The administration would have hoped the figures exceeded economists' forecasts—having in the past used stronger-than-expected data to trumpet Trump's economic agenda in the face of skepticism.
Following May's originally reported 172,000-job gain, the White House celebrated the findings, while Fox News economist Stephen Moore, a former campaign adviser to Trump, argued the "blowout" figures were an endorsement of "Trumponomics."
Success on employment has also become particularly pressing amid resurgent inflation and as polls show Americans increasingly grappling with cost pressures—testing claims from the administration that prices are easing.
A recent YouGov/Economist poll found that only 30 percent approved of Trump's handling of the economy, with 65 percent disapproving for a net rating of -35, results reflected in surveys from Fox News, CNN/SSRS and AP-NORC and others in recent weeks.
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Contact Newsweek editors for this story: Ben Kelly and Anthony Murray.
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