US job market stalled in July as employers cut 23,000 jobs, delivering political setback to Trump

The U.S. job market experienced an unexpected downturn in July 2026, as employers cut 23,000 jobs. This decline followed downward revisions to job gains in May and June, indicating a softer hiring landscape than previously understood. Sectors particularly affected by job losses included local government education and retail trade, with employment in local public schools decreasing by 50,000 and retail losing 19,000 positions.

Despite the job losses, the unemployment rate slightly decreased to 4.1% in July from 4.2% in June. However, this dip was attributed to 264,000 people exiting the labor force, rather than an increase in hiring, pushing the labor force participation rate to its lowest since February 2021. This stalled job market presents a political challenge for President Donald Trump, just three months before midterm elections, and complicates decisions for the Federal Reserve regarding inflation.

Economists had anticipated job creation closer to 100,000 for July, making the reported loss a significant surprise. While some sectors like healthcare continued to see employment trend upwards, the overall picture painted a concerning slowdown. This unexpected economic performance has led to commentary from political figures, with some suggesting that the administration's policies on tariffs and immigration are contributing to the weakening job market.