US hiring hits a rough patch: 23,000 jobs lost, pay growth slows and workers struggle to find new opportunities
A sharp slowdown in hiring and weaker pay growth are leaving American workers with fewer job options and less room in their household budgets.
- Aug 10, 2026,
- Updated Aug 10, 2026 10:53 AM IST
Finding a new job in the US is getting tougher as employers pull back on hiring, while slower wage growth is putting more pressure on workers already dealing with higher prices.
The US economy unexpectedly lost 23,000 jobs in July, according to new data released Friday by the Bureau of Labor Statistics. The unemployment rate, however, fell to 4.1% from 4.2% as more people left the labour force.
The July jobs figure was far below what economists had expected. They had forecast a gain of 95,000 jobs.
The weakness also extends to previous months. June’s job gains were revised sharply down to 20,000 from 57,000. May’s gains were also cut nearly in half, falling to 66,000 from 129,000.
Taken together, the figures show a US labour market that is losing momentum. Employers are still hiring in some areas, but opportunities are becoming harder to find across much of the economy.
“This was a bleak report, and it signals the labor market is stalling again,” Heather Long, chief economist at Navy Federal Credit Union, told CNN. “You can explain away a few things for July and a few things for June; but if you step back and look at the bigger picture, the past three months have seen 20,000 average job gains – no matter how you look at it, that’s anemic.”
Healthcare is doing most of the hiring
The jobs that are being created are also concentrated in a few sectors.
According to the report, healthcare and social assistance added an estimated 22,600 jobs in July, continuing to be one of the strongest sources of employment growth.
Construction and parts of manufacturing also added jobs. These sectors have benefited from investment linked to the artificial intelligence and data centre boom.
Professional and business services added 18,000 jobs, while the information sector, which includes much of the technology industry, added 11,000.
However, these gains were offset by large job losses in local government and leisure and hospitality.
Private employment rose by 30,000 jobs in July. But excluding healthcare, the increase was only 7,000 jobs.
“Healthcare has just been a printing press of jobs,” Tom Porcelli, chief economist at Wells Fargo, told CNN in an interview. “But if you strip that out from private (employment, which was up 30,000 jobs in July), the cyclical hiring was only +7,000 jobs. The backdrop is still incredibly uneven.”
For workers outside healthcare and a few other growing sectors, this means fewer openings to choose from and more competition for available jobs.
Nicole Bachaud, labor economist at ZipRecruiter, said employers are becoming more cautious as uncertainty weighs on hiring.
“Price volatility may be contributing to increased hesitation from employers,” Nicole Bachaud, labor economist at ZipRecruiter, wrote in a note Friday. “With job opportunities remaining scarce, more workers are exiting the labor market entirely.”
Why did leisure and hospitality lose jobs?
The leisure and hospitality sector recorded some of the biggest losses despite the 2026 FIFA World Cup being held in the US this summer.
The sector lost 43,000 jobs in June and another 40,000 jobs in July, according to BLS data.
That has raised questions because hotels, restaurants and other businesses were expected to benefit from the tournament and the millions of fans travelling across the country.
“It’s difficult for me to believe that we’ve lost 83,000 jobs over the last two months in leisure and hospitality services, given that the World Cup has been going on,” Gus Faucher, chief economist at The PNC Financial Services Group, said in an interview. “But that’s a very seasonal industry where we tend to see more hiring during the summer, and it could be that seasonal adjustment factors are off for some reason and are not picking up what’s truly reflected in the labor market.”
One possible explanation is the way employment data is adjusted for seasonal patterns.
Restaurants, hotels and other businesses usually hire more workers during the summer. If hiring patterns differ significantly from historical trends, seasonal adjustments can make the numbers look weaker than the underlying labour market may actually be.
Local government employment also fell by 57,000 jobs, including 49,600 jobs in local school districts.
Jason Pride, chief of investment strategy and research at Glenmede, said much of this decline should be viewed as a seasonal effect rather than a genuine loss of jobs.
“A summer release (of district workers) running about 5% larger than the historical norm produces a 50,000-job adjusted decline out of a million-job gross swing,” he wrote in a note Friday. “Distortions of this kind typically reverse as districts staff up for the new school year.”
Pay growth hits a five-year low
The weak jobs picture comes alongside a slowdown in wage growth, which could be a bigger concern for households.
Average hourly earnings rose just 0.1% in July from June. The annual growth rate fell to 3.2%, the lowest in five years.
At the same time, inflation remains higher, with the latest Consumer Price Index showing prices rising 3.5%.
That means many workers are seeing their pay rise only slightly while the cost of everyday goods and services continues to increase.
“You don’t need a PhD in economics to see that the financial squeeze is real for Americans right now, and I think the second half of this year will be belt-tightening for many families,” Long said.
For consumers, slower wage growth can mean less money left over for housing, food, transport and other expenses. It can also make people more hesitant to change jobs if they are unsure whether a new position will offer better pay.
Why are employers slowing hiring?
Employers are dealing with several pressures, including an aging population, slower immigration, higher oil prices, policy uncertainty, the rapid adoption of AI and the war with Iran.
These changes are also affecting the number of workers available in the economy. Because of an aging population and slower immigration, the US economy does not need to add jobs at the same pace it once did.
ADP chief economist Nela Richardson said high levels of economic uncertainty have resulted in hiring coming in fits and starts.
Even after accounting for unusual seasonal movements in July’s data, economists say the broader trend remains weak outside healthcare.
The result is a labour market where employers are not necessarily cutting large numbers of workers, but are also not creating enough new opportunities for people looking to switch jobs or enter the workforce.
What does this mean for interest rates?
The weaker labour market could affect the Federal Reserve’s decisions on interest rates.
Slower wage growth could help the Fed because weaker pay growth reduces the risk of demand-driven inflation. Wells Fargo’s Porcelli said the current job market is not supportive of demand-driven inflation and suggested the Fed is likely to remain on hold.
US stocks ticked up Friday after the jobs report, while Treasury yields fell. The odds of a Fed rate hike at the September meeting fell to 40%, from 55% one day earlier, according to CME FedWatch.
The next major test will come from inflation data.
The Consumer Price Index is due Wednesday. EY-Parthenon economists expect inflation to come in at 3.4%, slightly below the previous 3.5% reading. Lower gas prices compared with June could help keep inflation under control.
But even if inflation cools, weaker hiring and slower wage growth could continue to weigh on households.
“Americans feel stuck right now,” she said. “You’re not going to move with the mortgage rate at almost 7%. You’re not going to get a new job with hiring this anemic. People are holding on to their cars longer; they’re even holding on to their cell phones longer.”
“It’s this stuck feeling, and that’s not the dynamic American economy people want,” she said.
Finding a new job in the US is getting tougher as employers pull back on hiring, while slower wage growth is putting more pressure on workers already dealing with higher prices.
The US economy unexpectedly lost 23,000 jobs in July, according to new data released Friday by the Bureau of Labor Statistics. The unemployment rate, however, fell to 4.1% from 4.2% as more people left the labour force.
The July jobs figure was far below what economists had expected. They had forecast a gain of 95,000 jobs.
The weakness also extends to previous months. June’s job gains were revised sharply down to 20,000 from 57,000. May’s gains were also cut nearly in half, falling to 66,000 from 129,000.
Taken together, the figures show a US labour market that is losing momentum. Employers are still hiring in some areas, but opportunities are becoming harder to find across much of the economy.
“This was a bleak report, and it signals the labor market is stalling again,” Heather Long, chief economist at Navy Federal Credit Union, told CNN. “You can explain away a few things for July and a few things for June; but if you step back and look at the bigger picture, the past three months have seen 20,000 average job gains – no matter how you look at it, that’s anemic.”
Healthcare is doing most of the hiring
The jobs that are being created are also concentrated in a few sectors.
According to the report, healthcare and social assistance added an estimated 22,600 jobs in July, continuing to be one of the strongest sources of employment growth.
Construction and parts of manufacturing also added jobs. These sectors have benefited from investment linked to the artificial intelligence and data centre boom.
Professional and business services added 18,000 jobs, while the information sector, which includes much of the technology industry, added 11,000.
However, these gains were offset by large job losses in local government and leisure and hospitality.
Private employment rose by 30,000 jobs in July. But excluding healthcare, the increase was only 7,000 jobs.
“Healthcare has just been a printing press of jobs,” Tom Porcelli, chief economist at Wells Fargo, told CNN in an interview. “But if you strip that out from private (employment, which was up 30,000 jobs in July), the cyclical hiring was only +7,000 jobs. The backdrop is still incredibly uneven.”
For workers outside healthcare and a few other growing sectors, this means fewer openings to choose from and more competition for available jobs.
Nicole Bachaud, labor economist at ZipRecruiter, said employers are becoming more cautious as uncertainty weighs on hiring.
“Price volatility may be contributing to increased hesitation from employers,” Nicole Bachaud, labor economist at ZipRecruiter, wrote in a note Friday. “With job opportunities remaining scarce, more workers are exiting the labor market entirely.”
Why did leisure and hospitality lose jobs?
The leisure and hospitality sector recorded some of the biggest losses despite the 2026 FIFA World Cup being held in the US this summer.
The sector lost 43,000 jobs in June and another 40,000 jobs in July, according to BLS data.
That has raised questions because hotels, restaurants and other businesses were expected to benefit from the tournament and the millions of fans travelling across the country.
“It’s difficult for me to believe that we’ve lost 83,000 jobs over the last two months in leisure and hospitality services, given that the World Cup has been going on,” Gus Faucher, chief economist at The PNC Financial Services Group, said in an interview. “But that’s a very seasonal industry where we tend to see more hiring during the summer, and it could be that seasonal adjustment factors are off for some reason and are not picking up what’s truly reflected in the labor market.”
One possible explanation is the way employment data is adjusted for seasonal patterns.
Restaurants, hotels and other businesses usually hire more workers during the summer. If hiring patterns differ significantly from historical trends, seasonal adjustments can make the numbers look weaker than the underlying labour market may actually be.
Local government employment also fell by 57,000 jobs, including 49,600 jobs in local school districts.
Jason Pride, chief of investment strategy and research at Glenmede, said much of this decline should be viewed as a seasonal effect rather than a genuine loss of jobs.
“A summer release (of district workers) running about 5% larger than the historical norm produces a 50,000-job adjusted decline out of a million-job gross swing,” he wrote in a note Friday. “Distortions of this kind typically reverse as districts staff up for the new school year.”
Pay growth hits a five-year low
The weak jobs picture comes alongside a slowdown in wage growth, which could be a bigger concern for households.
Average hourly earnings rose just 0.1% in July from June. The annual growth rate fell to 3.2%, the lowest in five years.
At the same time, inflation remains higher, with the latest Consumer Price Index showing prices rising 3.5%.
That means many workers are seeing their pay rise only slightly while the cost of everyday goods and services continues to increase.
“You don’t need a PhD in economics to see that the financial squeeze is real for Americans right now, and I think the second half of this year will be belt-tightening for many families,” Long said.
For consumers, slower wage growth can mean less money left over for housing, food, transport and other expenses. It can also make people more hesitant to change jobs if they are unsure whether a new position will offer better pay.
Why are employers slowing hiring?
Employers are dealing with several pressures, including an aging population, slower immigration, higher oil prices, policy uncertainty, the rapid adoption of AI and the war with Iran.
These changes are also affecting the number of workers available in the economy. Because of an aging population and slower immigration, the US economy does not need to add jobs at the same pace it once did.
ADP chief economist Nela Richardson said high levels of economic uncertainty have resulted in hiring coming in fits and starts.
Even after accounting for unusual seasonal movements in July’s data, economists say the broader trend remains weak outside healthcare.
The result is a labour market where employers are not necessarily cutting large numbers of workers, but are also not creating enough new opportunities for people looking to switch jobs or enter the workforce.
What does this mean for interest rates?
The weaker labour market could affect the Federal Reserve’s decisions on interest rates.
Slower wage growth could help the Fed because weaker pay growth reduces the risk of demand-driven inflation. Wells Fargo’s Porcelli said the current job market is not supportive of demand-driven inflation and suggested the Fed is likely to remain on hold.
US stocks ticked up Friday after the jobs report, while Treasury yields fell. The odds of a Fed rate hike at the September meeting fell to 40%, from 55% one day earlier, according to CME FedWatch.
The next major test will come from inflation data.
The Consumer Price Index is due Wednesday. EY-Parthenon economists expect inflation to come in at 3.4%, slightly below the previous 3.5% reading. Lower gas prices compared with June could help keep inflation under control.
But even if inflation cools, weaker hiring and slower wage growth could continue to weigh on households.
“Americans feel stuck right now,” she said. “You’re not going to move with the mortgage rate at almost 7%. You’re not going to get a new job with hiring this anemic. People are holding on to their cars longer; they’re even holding on to their cell phones longer.”
“It’s this stuck feeling, and that’s not the dynamic American economy people want,” she said.