The report also sharply revised previous employment figures lower, with payrolls for May and June reduced by a combined 103,000 jobs, pointing to a weaker labour market than initially estimated.
Despite the decline in employment, the unemployment rate edged down to 4.1% as 264,000 Americans exited the labour force, reducing the share of people working or looking for work.
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The July payroll figures marked a sharp reversal for the US labour market, which had shown signs of recovery this year following a subdued 2025. Hiring had improved, albeit at a modest pace, even as the conflict in the Persian Gulf pushed up energy prices and put pressure on household budgets.
The latest data highlights increasingly uneven conditions across the labour market. While some employers continue to face difficulties filling vacancies, others are relying more heavily on technology to perform tasks previously carried out by workers, limiting the need for additional hiring.
The figures also reinforce the contrasting trends that have characterised the US jobs market in recent months. Layoffs have remained historically low, reflecting employers’ reluctance to reduce headcount after the labour shortages experienced following the COVID-19 pandemic.
At the same time, jobseekers have continued to face a difficult environment. Earlier data showed a growing share of unemployed Americans remaining out of work for six months or longer, underscoring the challenges of securing new employment despite relatively low unemployment.Economists have described these conditions as a “no hire, no fire” labour market, where employers are largely holding on to existing staff but are showing little appetite for expanding their workforce.
The report suggests hiring momentum has weakened, even as employers continue to retain existing workers amid an uncertain economic backdrop that includes higher energy prices and the growing use of technology in the workplace.