Data released Friday by the U.S. Bureau of Labor Statistics (BLS) shows that total nonfarm payroll employment rose by 73,000 jobs in July from the month prior, while unemployment ticked up slightly to 4.2%. Economists had expected 100,000 jobs to be created and the BLS report negative revisions to May and June numbers were larger than normal.

From the BLS: “The change in total nonfarm payroll employment for May was revised down by 125,000, from +144,000 to +19,000, and the change for June was revised down by 133,000, from +147,000 to +14,000. With these revisions, employment in May and June combined is 258,000 lower than previously reported.”

The unemployment rate has hovered between 4.0% and 4.2% since May of 2024. 

Most of the job growth in July occurred in the health care (+55,000 jobs) and social assistance (+18,000 jobs) sectors. 

“Notably, goods-producing industries saw contraction for the third straight month,” said Joel Kan, MBA’s vice president and deputy chief economist. “Service industries involved in trade also saw declines in job growth, potentially a result of the uncertain tariff environment, as businesses either put their activity on pause or pulled back altogether.”

The Federal government also continued to cut jobs, losing 12,000 in July.

The construction sector added 2,000 jobs in July. However, the residential building construction sector lost 1,400 jobs and the residential specialty trade contractor segment lost 3,000 jobs. The majority of the job gains in the construction sector in July were in heavy and civil engineering construction, which added 6,000 jobs from the month prior. 

The real estate segment was fairly unchanged compared to the month prior with real estate adding 700 jobs in July, and rental and leasing services adding 500 jobs. 

The Mortgage Bankers Association (MBA) believes the Fed will still cut rates this year. 

“The outlook for inflation and employment remains fragile, and MBA’s forecast is for the unemployment rate to increase to over 4.5% by the end of the year, peaking at around 4.8% in early 2026, as the economy continues to slow,” Kan said. “We expect that this labor marketing softening will prompt the Fed to cut rates twice this year and once in 2026.”

Lisa Sturtevant, the chief economist at Bright MLS, said in a statement: “Today’s jobs report complicates the outlook for a Fed rate cut in September. The unemployment rate is higher than a year ago but remains low by historical standards. This week, Chairman Powell said that the unemployment rate was the main number to watch as they evaluate the health of the labor market.”

According to Sturtevant, at 4.2% it is unclear if the Fed will view the unemployment rate as an indication of a weakening labor market.

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