US jobs stall in July as government cuts offset private gains, wage growth slows
US employers added no net jobs in July as a 53,000 drop in government payrolls—driven by local school layoffs—erased a 30,000 rise in private hiring, the Bureau of Labor Statistics reported Friday.
Source: Deloitte · July 31, 2026 at 3:02 AM · AI-assisted report
KUALA LUMPUR, 31 JULY 2026 —
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US employers added no net jobs in July as a 53,000 drop in government payrolls—driven by local school layoffs—erased a 30,000 rise in private hiring, the Bureau of Labor Statistics reported Friday.
Market Impact
Private payrolls rose only 30,000 after an upwardly revised gain of 20,000 in June, data released by the agency showed. Construction added 22,000 jobs and durable-goods manufacturing 18,000, but those gains were offset by declines in retailing (down 19,400), financial services (down 14,000), non-durable manufacturing (down 13,000) and leisure and hospitality (down 40,000), including a 26,100 drop in restaurants and bars. Professional and business services eked out an 18,000 increase.
Average hourly earnings climbed just 0.1% month-on-month in July, the smallest rise since April 2025 and a slowdown from 0.2% in June, the agency said. Year-on-year wage growth eased to 3.2%, the lowest since May 2021, when the pandemic was receding. Consumer prices rose 3.5% in June and are expected to accelerate when the July figures are published next week, leaving real wages falling further behind inflation.
The household survey—covering self-employment as well as payroll jobs—showed the labor force shrank by 264,000 in July, pushing the participation rate to 61.4%, the lowest since February 2021. Employment fell by 87,000 and the unemployment rate edged down to 4.1% from 4.2% in June.
“The decline in participation means the labor market is weaker than the headline unemployment rate suggests,” said Ira Kalish, chief global economist at Deloitte Services LP. Slower net immigration is reducing the pool of available workers, he noted, which magnifies the impact of any hiring slowdown.
Employers announced 33,429 job cuts in July, according to Challenger, Gray & Christmas, down 46% from a year earlier and the lowest monthly total in two years. Through the first seven months of 2026, dismissals fell 41% year-on-year to 268,114.
Technology accounted for 29.5% of July’s cuts and 31% of year-to-date reductions, Challenger reported. Software firms have slashed 149,023 jobs in 2026 so far, up 67% from the same period last year.
Transportation followed with 41,748 job losses in the first seven months, a 303% surge from a year ago as rising costs and shifting trade lanes pressured trucking and logistics.
“De-coupling from China is proving harder than intended,” Kalish said. “US imports of server-related equipment have reached about US$25 billion per month this year, up from roughly US$6 billion per month in early 2025.” Mexico’s exports of automotive data-processing gear have nearly tripled over the past two years, he added.
AI-related investment is driving growth in Mexico, Taiwan, South Korea and Japan, Kalish noted, while the US labor market feels the strain because server production is far less job-intensive than auto assembly. “The current tech boom is not translating into broad-based hiring at home,” he said.
The soft jobs report lowers the chance of a Federal Reserve rate hike in September. Fed funds futures implied odds of a September increase fell to 41.9% on Friday from 55% the day before the data, according to CME Group.
“Inflation remains the Fed’s primary concern, but a weakening labor market will ease wage pressures and could tilt the balance toward easier policy,” Kalish said.
Related: Federal Reserve