Economy Lost 23,000 Jobs in July While Experts Expected to Gain 83,000

The Numbers, and Why They're Worse Than They Look

According to NBC News, economists surveyed by Dow Jones were expecting 83,000 new jobs. What the Bureau of Labor Statistics delivered instead was a loss of 23,000. That's a gap of 106,000 jobs between what the experts predicted and what actually happened. In any other year, that would be the lead story everywhere for a week.

But wait, there's more. The BLS also revised down its prior two months by a combined 103,000 jobs. May's number got slashed by 66,000. June's got cut by 37,000. So the four months of positive job growth everyone was cautiously celebrating? It was softer than reported the entire time. The foundation was already cracking before July showed up and knocked the whole thing over.

The unemployment rate did tick down slightly, to 4.1%. Try not to get too excited. When people stop looking for work, they stop counting as unemployed. A falling unemployment rate during a month when the economy is actually shedding jobs is about as reassuring as your doctor saying your blood pressure looks great right before reading you the wrong chart.

Where the Jobs Went

The BLS flagged local government education as the biggest drag, down 50,000 roles in July. That category typically reflects teachers during summer break, so some of that is seasonal noise. But retail shed 19,000 jobs and the financial industry dropped 14,000. Those aren't seasonal. Those are sectors responding to something real.

Health care continued to add jobs, 22,000 in July, which sounds fine until you read the fine print: the BLS noted that was slower than the average monthly gain over the prior 12 months. So even the one bright spot is dimming. The parts of the economy still hiring are hiring less enthusiastically than before. That's the story underneath the story.

The War Nobody's Talking About Enough

NBC News points out that this hiring data lands against what it diplomatically calls "a complicated economic backdrop." The U.S. war with Iran is ongoing, the Strait of Hormuz remains partially closed, and energy prices are still significantly elevated from where they were before the war began in late February.

Gas is averaging $4.04 a gallon nationally as of last Friday. That is up 36% since February 28, the day the Iran war started. Inflation is sitting at 3.5%, well above the Federal Reserve's 2% target, and wages are not keeping pace. So workers who still have jobs are, in many cases, effectively taking a pay cut in real terms. Every trip to the grocery store, every tank of gas, every utility bill is quietly eating into whatever wage gains the past few years produced.

The Strait of Hormuz is one of the most critical oil chokepoints on the planet. About 20% of global oil flows through it. When it's disrupted, energy markets convulse, and that pain moves downstream through the entire economy fast. There is no clean way to decouple what's happening in the labor market from what's happening in the Persian Gulf right now.

Wall Street Had an Interesting Reaction

In the immediate aftermath of the report, stock futures went up. S&P 500 futures climbed 0.5%, Nasdaq 100 futures rose 1%, and the 10-year Treasury yield dropped sharply to 4.6%, according to NBC News. If your brain just short-circuited, you're not alone.

Here is the logic, perverse as it is: a terrible jobs report increases the odds that the Federal Reserve cuts interest rates sooner, and lower rates are generally good for stocks and bonds. So markets were essentially cheering the economic misery because it makes cheap money more likely. This is a completely rational response by market participants and also one of the most clarifying illustrations of how disconnected financial markets can be from the actual lived experience of working people. Traders were popping champagne over news that 23,000 people lost their jobs last month.