The U.S. job market unexpectedly stalled in July.

A report Friday from the Labor Department shows that employers cut 23,000 jobs last month, and job gains for May and June were revised sharply lower.

The unemployment rate dipped to 4.1%, but only because more than 260,000 people dropped out of the workforce.

It was the second month in a row that the monthly jobs tally came in weaker than forecasters had expected.

“We are increasingly hearing from workers that they are anxious about their job security and they are frustrated by the fact that they are stuck in roles that are not necessarily good for them,” said Daniel Zhao, chief economist at the job search website Glassdoor. “And that’s on top of workers who are not in a job right now and feel frozen out of the job market.”

Glassdoor’s worker confidence index slumped in July to a record low.

The Fed’s job gets harder

Restaurants and retailers cut thousands of jobs last month, and local government also saw large job losses. Healthcare continued to add workers, but at a more modest pace than earlier in the year.

The softening job market may complicate the Federal Reserve’s job, since it’s also battling stubborn inflation. The Fed may be more cautious about raising interest rates at a time when the labor market appears less stable.

For people who are working, average wages have risen 3.2% in the last 12 months. That’s likely not enough to keep pace with inflation, however, so workers’ paychecks don’t stretch as far as they used to.

“Part of the reason that workers are feeling bad about today’s job market,” Zhao says, is that “a lot of those wage gains have been eaten up by rising energy prices.”

News Source : https://www.opb.org/article/2026/08/07/employers-unexpectedly-cut-23000-jobs-as-labor-market-wilts/