Employment - June 2026

Falling Labor Force Participation Raises Concerns About the Economy

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Key takeaways from the Bureau of Labor Statistics (BLS) report, The Employment Situation – July 2026, include:

• Payrolls contracted, as employers cut 23,000 jobs in July. The BLS also revised payroll figures for May and June, with May being reduced by 62,000 workers to 63,000, and June was cut by 37,000 employees to 20,000.
• Employment in the private sector increased by 30,000 workers.
• Large cuts by local governments in education (50,000) accounted for much of July’s decrease in employment.
• June’s unemployment rate fell to 4.1%, as more people left the workforce.
• A broader measure, U6, which includes marginally attached workers, remained at 7.9% in July.
• Average hourly wages increased by $0.02 in July. Wages are 3.2% higher than a year ago.

The July employment report presents a mixed picture of the U.S. labor market, but overall, it was discouraging. On the surface, the unemployment rate improved slightly, falling to 4.1%. But the decline is misleading. Fewer people were employed in July, and the unemployment rate fell primarily because even more people stopped looking for work. When people are no longer seeking employment, they are no longer counted as unemployed.

The labor force shrank by 264,000 people in July, pushing the labor force participation rate down from 61.5% to 61.4%. That is the lowest participation rate since February 2021 and nearly one percentage point below its level a year ago. The continuing decline in participation is an important warning sign because it means a smaller share of the population is either working or actively looking for work.

Hiring Continues to Slow

Employers added fewer workers to payrolls in July, while the Bureau of Labor Statistics also revised its estimates for May and June, which were significantly lower. Private-sector payrolls increased by only 30,000 workers. That is a positive number, but it is well below the average monthly increase of about 61,000 jobs since the beginning of the year.

The largest decline in employment came from local governments, particularly in education. This may be partly a statistical quirk because many teachers' contracts end during the summer and are renewed when the new school year begins. Private educational institutions, in contrast, added 2,800 workers in July.

Other industries experienced employment declines as well, including leisure and entertainment, retail, and financial services. The decline in financial services may reflect, at least in part, the growing use of artificial intelligence and other technologies that allow companies to accomplish more with fewer employees.

The end of the World Cup may also be affecting the employment numbers. Hotels, restaurants, and bars hired temporary workers earlier in the year in anticipation of increased demand from the tournament. With the World Cup ending on July 19, some of those temporary positions are no longer needed.

Graph Here

A Weaker Labor Market Despite Consumer Spending