U.S. loses 23K jobs in July, economists detail housing effects

The U.S. labor market lost momentum in July, with employers cutting jobs and federal statisticians sharply revising payroll gains from the previous two months lower — signs of a cooling employment picture that could shape the outlook for housing demand and mortgage activity.

The U.S. Bureau of Labor Statistics reported Friday that total nonfarm payroll employment declined by 23,000 in July, while the unemployment rate held steady at 4.1%.

May and June payroll growth was also revised to include a combined 103,000 fewer jobs — leaving employment gains over those months significantly weaker than previously estimated.

“Consumer price inflation is running faster, so wage gains are wiped out at gas stations and grocery stores,” said National Association of Realtors Chief Economist Lawrence Yun. “The wage gain is still outpacing home price growth, as has been the case for the past 18 months. The bond market is liking the lower wage pressure, and mortgage rates look to take a decimal-point dip.

Despite the decline in payrolls, several broader labor market measures remained relatively stable.

The number of unemployed Americans was little changed at 6.9 million, while the labor force participation rate held at 61.4% and the employment-population ratio remained at 58.9%.

“The July jobs report points to a labor market that is clearly losing momentum, even if seasonal weakness likely exaggerated the headline decline,” said First American Senior Economist Sam Williamson. “For the Fed, softer hiring tilts the balance away from further tightening, which could help keep mortgage rates in check and provide some modest relief for prospective home buyers.”

Payroll declines offset by health care gains

July’s job losses were concentrated in local government education and retail trade, while health care continued to add jobs.

Local government education shed 50,000 positions after little net change over the previous year. Retail trade lost 19,000 jobs — driven primarily by declines at warehouse clubs, supercenters and other general merchandise retailers, which cut 21,000 jobs.

Gas stations and fuel dealers lost another 5,000 positions, although sporting goods, hobby, musical instrument, book and miscellaneous retailers added 10,000 jobs.

“What is concerning is the tight labor market despite the weak job additions,” Yun added. “The unemployment rate is super low at 4.1% and ‘help wanted’ signs abound. With the southern border crossings effectively shut down and legal immigration at near historic lows, more Americans need to step into the job market.

“Yet labor force participation has been falling and has hit a new low in modern times (aside from the few months during the COVID lockdown). Sadly, too many Americans are not even searching for a job.”

Financial activities also continued to weaken, losing 14,000 jobs during the month. Most of those losses occurred in credit intermediation and related activities, which declined by 9,000 jobs, and insurance carriers and related businesses, which fell by 7,000.

Employment in the financial sector has declined by 121,000 jobs since reaching a recent peak in May 2025.

Health care remained one of the economy’s strongest sources of hiring, adding 22,000 jobs in July.

A majority of that growth came from ambulatory health care services, which added 18,000 positions. While hiring continued, the pace slowed from the industry’s average monthly gain of 36,000 jobs over the previous year.

“A lower risk of additional Fed tightening could help keep a lid on longer-term interest rates and mortgage rates, easing some pressure on affordability,” said Williamson. “Slower hiring can also weigh on job mobility and consumer confidence, so the housing benefit is likely to be modest. Still, a cooler labor market that takes some pressure off borrowing costs would be a better backdrop for buyers than another leg higher in mortgage rates.”

Long-term unemployment drops slightly

The unemployment rates for teenagers and Hispanic workers declined during the month — while rates for adult men, adult women and white, Black and Asian workers were largely unchanged.

The number of workers on temporary layoff increased by 153,000 to 921,000, while the number of permanent job losses held steady at 1.7 million.

“The weaker July employment data might provide a little breathing room for the Federal Reserve as it considers its next policy move, but inflationary pressures are expected to persist through the remainder of 2026 with no clear end in sight for the war in Iran,” said Mortgage Bankers Association Vice President and Chief Economist Joel Kan. “We anticipate that the Federal Reserve will raise the fed funds rate in early 2027, but any additional upside surprises to inflation are likely to bring that timetable forward.”

Long-term unemployment edged lower to 1.8 million people — representing 25.5% of all unemployed workers. Meanwhile, 4.8 million Americans continued working part time for economic reasons because they were unable to find full-time work or had their hours reduced.

This article was written by Jonathan Delozier and generated with the assistance of HousingWire Automation. It was reviewed by a HousingWire editor before publication.