Jobs report shows US unexpectedly lost jobs in July

The figure departs from the labor market's resilient performance in 2026.

The U.S. economy unexpectedly lost jobs in July, demonstrating a wobbly labor market as shoppers continued to withstand a surge of inflation set off by the Iran war.

The U.S. lost 23,000 jobs in July, according to the federal government's monthly jobs report, which marked a decline from 57,000 jobs added in June.

The unemployment rate fell slightly from 4.2% in June to 4.1% in July, the Bureau of Labor Statistics (BLS) said. Unemployment remains low by historical standards.

The lackluster figure recorded in July departs from largely resilient performance for the labor market so far in 2026, despite a historic oil shock that has driven up fuel prices and hiked supply-chain costs for a host of other goods.

A government report issued last week showed a steeper slowdown in gross domestic product than expected over three months ending in June, however, suggesting strain in the underlying economy over the early months of the war.

The U.S. added an average of 92,000 jobs per month over the first half of 2026, U.S. Bureau of Labor Statistics data showed. That pace marks an improvement from an average of about 7,000 jobs lost per month over the second half of 2025.

The Iran war drove up gasoline prices and catapulted inflation to a three-year high in May. A preliminary peace agreement in June offered up some relief, but a burst of on-again, off-again fighting in recent weeks caused crude prices to rise again.

The combination of elevated inflation and a resilient labor market has raised the chances of an interest rate hike, futures markets show. Investors peg the odds of a quarter-point rate hike next month at about 56%, according to the CME Group's FedWatch Tool , a measure of market sentiment.

The sluggish performance in July, however, could complicate a potential rate increase next month, Diane Swonk, the chief economist at KPMG, told ABC News Live.

"This doesn’t take a rate hike off the table in the month of September but it makes it much more fraught with risk now to the labor market if inflation remains persistent," Swonk said.

The Fed opted to hold interest rates steady at its meeting last week, but central bankers appeared divided over the move. Three of the 12 members on the Fed's policymaking board voted in favor of a rate hike, marking the largest number of dissenters casting ballots in the same direction since 2016.

The benchmark rate stands at a level between 3.5% and 3.75%. That figure marks a significant drop from a recent peak attained in 2023, but borrowing costs remain well above a 0% rate established at the outset of the COVID-19 pandemic.

Fed Chair Kevin Warsh, who took the helm of the central bank this summer, has repeatedly vowed to dial back inflation.

"The committee remains resolute -- you’ve heard this before -- that we will deliver price stability," Warsh told reporters in Washington, D.C., last week.

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