US job and wage growth falls back to earth in July

For the past couple of months, the US economy had been largely holding up despite still-gloomy consumer sentiment snd higher prices. Part of that was due to a jobs market that had shown signs of strength in 2026, with 3 out of the first 4 months of the year having gains of 150,000 jobs or more, and new unemployment claims being at or near their lowest amounts in 57 years.

Then the July jobs report came out on Friday, and suddenly the employment situation doesn't seem so great in the US.

The July jobs report delivered a nasty surprise: Instead of adding jobs as economists expected, the U.S. economy lost 23,000 jobs. Even worse, May and June payrolls were revised down by a combined 103,000 jobs, revealing a much weaker labor market than previously reported.

— Jon Cooper (@joncooper-us.bsky.social) August 7, 2026 at 1:19 PM

Oops? Maybe not so good. And we are back to an average of less than 50,000 jobs being added per month, much like we were for most of 2025.

But hey, at least the unemployment rate dropped to 4.1%, that's good, right? Not if you read the actual jobs report.

Both the labor force participation rate, at 61.4 percent, and the employment-population ratio, at 58.9 percent, changed little in July. Since January, the labor force participation rate declined by 0.7 percentage point, and the employment-population ratio decreased by 0.5 percentage point.

The labor force (-264,000) and the number of people listed as employed (-87,000) went down in July, and it continues a slide in both measures that we've been seeing since Trump 2.0 kicked into gear in Spring 2025.

In addition to the stagnating overall numbers for jobs, wage growth also flatlined in July.

In July, average hourly earnings for all employees on private nonfarm payrolls, at $37.62, were little changed (+2 cents). Over the year, average hourly earnings have increased by 3.2 percent. In July, average hourly earnings of private-sector production and nonsupervisory employees, at $32.40, were little changed (+4 cents).

Even worse is that the previous two months had average hourly earnings revised down, with May being 2 cents an hour lower, and June being reduced by 4 cents an hour. Which means that average hourly earnings went lower than what was reported last month.

It also gives a clear contrast to the times of inflation of 2022, where wages were rising by 2-3 times as much as they are in Summer 2026. We're back to what wage growth was in 2017, but with inflation 1-2% higher today than it was then.

We find out this week what inflation ended up being for July, and we know gas prices stopped falling that month and creeped back up. And given how bad the jobs market and wage situation got worse last month, I can't think that consumer sentiment for August gets better. And our deteriorating savings rates will get even lower, unless consumer spending nosedives.

The stock market may be bubbly at this time, but the Real Economy for America may have started to slump. We'll have to see what the data that comes out this week and next to see if July is the start of something worse, or a bump in the road.