July’s Multi-Faceted Labor Market Complicates Fed Path
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US payrolls rose by just 73,000 in July, signaling slower but still-healthy growth. The unemployment rate remains stable, ticking back up to 4.2%, while layoff indicators remain mild. That is despite downward payroll revisions of -258,000 to prior months. Regardless of the slowing pace of payrolls growth, the labor market remains roughly in balance, though downside risks remain if softer hiring broadens.

July’s Multi-Faceted Labor Market Complicates Fed Path

August 01, 2025

US payrolls rose by just 73,000 in July, signaling slower but still-healthy growth. The unemployment rate remains stable, ticking back up to 4.2%, while layoff indicators remain mild. That is despite downward payroll revisions of -258,000 to prior months. Regardless of the slowing pace of payrolls growth, the labor market remains roughly in balance, though downside risks remain if softer hiring broadens.

Trusted Insights for What’s Ahead®

  • The labor market remains broadly stable despite large downward payroll revisions over recent months showing that the pace of hiring has slowed.
  • Payrolls rose by 73,000 in July, while the unemployment rate returned to 4.2%, where it had been from March-May, signaling no material shift in labor market balance.
  • Layoffs remain limited, and the pace of job losses moderated after a temporary spike in May. However, the job-finding rate continued to drift lower, pointing to more hesitant hiring.
  • Retirements and immigration restrictions appear to be reducing labor force growth.
  • Wage growth held firm in July, rising 0.4% month-over-month and lifting annual growth to 3.9%, with notable gains in retail, wholesale, and mining, though weakness remained in utilities and manufacturing.
  • Looking ahead, the pace of layoffs and the durability of wage and hours grow
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Author

Mitchell Barnes

Mitchell Barnes

Economist

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