July US payrolls fall by 23,000 as education weighs

2026-08-07

US nonfarm payrolls fell by 23,000 in July, the first decline in five months since February, the Labor Department said on the 7th. Economists had expected gains of 80,000 to 90,000. The increases for May were revised down to 63,000 from 129,000, while June was cut to 20,000 from 57,000.

Payrolls decline

The main drag came from state and local government education, which fell by 49,600 from the previous month. Employment in leisure and hospitality, including food service, dropped by 40,000, while retail shed 19,400 jobs. On the other hand, health care and social assistance rose by 22,600, reflecting an aging population, and transportation and warehousing added nearly 10,000 jobs. Construction also added more workers in nonresidential building and specialty trades, likely supported by demand for data centers.

Markets and the Fed

Private payrolls increased by 30,000, matching June's pace. The unemployment rate eased 0.1 percentage point from the previous month to 4.1%, while the labor force participation rate fell to 61.4%, the lowest since February 2021. Average hourly earnings rose 3.2% from a year earlier, below the market forecast of 3.5%.

After the report, financial markets pared expectations for an early rate hike by the Fed. The yield on the US 2-year Treasury note fell immediately after the release, and the yen briefly surged to the upper 156-yen range against the dollar in the New York foreign exchange market. The Fed left its policy rate unchanged at the FOMC meeting at the end of July, although three regional Fed presidents, including Cleveland Fed President Beth Hammack, voted against the decision, arguing for a 0.25% rate hike.

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