San Francisco Frontiers - US unexpectedly loses jobs in blow to Trump's economy claims

The world's largest economy lost 23,000 jobs in July, data published by the US Bureau of Labor Statistics showed, signalling potential labor market weakness after months of steady growth.

The unemployment rate ticked down to 4.1 percent, likely a result of falling labor supply as the US economy grapples with an ageing population and lower net migration.

Since taking office for his second term, Trump has unleashed a spate of policies aimed at reviving domestic manufacturing and curbing surging inflation.

Republicans face a stiff test in November's midterm elections, with the state of the economy a key issue for Democrats who are seeking to wrest back control of both houses of Congress.

Friday's data will also pose a question to the US Federal Reserve, which has been signalling it was preparing for a rate hike later this year.

- Implications for Fed -

In addition to the loss of jobs in July, the BLS revised down job growth in the previous two months by 103,000, showing the labor market to be less robust than previously reported.

Based on the new figures, job growth hit a peak in March before declining in the next three months and entering negative territory in July.

Analysts had expected further job growth, with economists polled by Dow Jones Newswires and the Wall Street Journal expecting 83,000 new jobs to be added in July.

The decline and revisions to the previous months will spark concern that the labor market may not be as strong as was previously reported.

The unemployment rate has remained relatively steady through choppiness in the labor market, due to the overall drop in labor supply.

Friday's figures showed the labor force participation rate -- a key metric -- dropped slightly in July, after a sharp decline the month before.

Policymakers at the US Federal Reserve watch the labor market closely, as their dual mandate requires the Fed to deliver maximum employment while ensuring inflation remains at a long-term target of two percent.

The Fed has missed that target for five years, as inflation has battered US households since the pandemic.

Last month, the Fed held interest rates steady, but three regional Fed presidents dissented in favor of a rate hike.

"This morning's report is a game changer in the sense that all of the recent focus has been on inflation and this report highlights the risks that are embedded in the labor market as well," said Chris Zaccarelli of Northlight Asset Management.

"Before today, many were expecting that the Fed had no choice but to raise rates in order to fight stubbornly high inflation, because the job market was so strong, but this report shows that isn't the case."

- Retail trade losses -

Employment declined in the local government education and retail trade sectors, while it continued to grow in health care, the BLS statement said.

Retail trade also lost 19,000 jobs, with employment declining in warehouse retailers -- firms like Costco, Sam's Club and others that offer discounts for wholesale quantities of household goods -- and general merchandise stores.

Employment in the financial activities sector continued its downward trend, losing 14,000 jobs. Employment in the sector is down 121,000 from its May 2025 peak.

The health care sector has buoyed the US labor market over the last year, with more Americans aging and requiring medical assistance.

In July, the sector added 22,000 jobs, but it was a slower pace than its average gain over the last year.

Average hourly earnings increased by 3.2 percent over last year, lagging inflation and therefore leaving workers with less income in real terms.

I.Wright--SFF