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—led by local school staffing cuts—erased private gains in construction and durable-goods manufacturing, the Labor Department’s establishment survey showed.
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—led by local school staffing cuts—erased private gains in construction and durable-goods manufacturing, the Labor Department’s establishment survey showed.
Market Impact
Private payrolls rose by 30,000 last month, but that followed a downwardly revised gain of just 20,000 in June, according to the survey. Excluding government, hiring was concentrated in a handful of sectors: construction added 22,000 jobs and durable-goods manufacturing 18,000. 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). Within the last category, restaurants and bars shed 26,100 jobs.
Average hourly earnings rose 0.1% month-on-month in July, the smallest increase since April 2025, and were up 3.2% year-on-year—the slowest annual gain since May 2021. Wage growth lagged the 3.5% rise in the consumer price index recorded in June. Consumer spending has held up, but that was largely due to a decline in the personal savings rate, which is now at historic lows.
The household survey showed the labor force shrank by 264,000 in July, pushing the participation rate to 61.4%—its lowest since February 2021. Employment fell by 87,000 and the unemployment rate dipped to 4.1% from 4.2%. A falling labor supply can depress participation and unemployment rates simultaneously, making the headline figures less informative about underlying labor-market strength.
“Ira Kalish, chief global economist at Deloitte Services LP, said a weakening labor market will likely ease inflationary pressure. He noted that softer job gains and slowing wage growth reduce the urgency for further Federal Reserve rate increases. After the report, market-implied odds of a September rate hike dropped from 55% to 41.9%.”
US employers announced 33,429 job cuts in July, a 46% drop from a year earlier and the lowest monthly total in two years, according to Challenger data cited by Deloitte. The technology sector accounted for 29.5% of all dismissals in July and 31% over the first seven months of 2026, with 149,023 job reductions in the industry so far this year—up 67% from the same period last year.
Transportation was the second-hardest-hit sector, with 41,748 layoffs in the first seven months, a 303% increase year-on-year. Rising costs and shifting trade patterns were cited as drivers.
Kalish said the data underscored the challenge of decoupling US supply chains from China despite tariff efforts by successive administrations. “China has developed massive capacity to produce and distribute key products,” he said. US imports of server-related equipment have climbed to about US$25 billion per month from roughly US$6 billion per month in early 2025, while Mexican exports of automotive data-processing equipment have nearly tripled in two years.
AI-related investment is boosting growth not only in the United States but also in Mexico, Taiwan, South Korea and Japan. For Mexico, Kalish said, “the economy would likely not be growing at all without the surge in AI-related exports.” Yet because server production is far less labor-intensive than auto manufacturing, the current expansion has a muted impact on employment compared with past industrial booms.
Related: Federal Reserve