The July jobs report was bad enough to get the BLS commissioner fired. After revisions to the prior two months’ data, the average pace of job growth over the last three months was just 35,000. Furthermore, all of the job gains were in the healthcare sector. Pulling out healthcare, the economy actually lost jobs between April and July.

The weakness was not just on the establishment side. The household survey also showed evidence of a weakening labor market. While the unemployment rate remained at 4.2 percent, a low level by historical standards, the employment to population ratio (EPOP) has been falling. The EPOP for prime age workers (ages 25 to 54) fell 0.3 percentage points (pp) in July. The overall EPOP is down by 0.4 pp from its April level, as employment in the household survey is down by 863,000. These data are highly erratic, but the numbers are going in the wrong direction.

Healthcare to Again Dominate Job Growth

The only sector outside of healthcare that had shown consistent job growth in the last year is state and local government employment. That was reversed in the last three months as the two sectors together lost 2,000 jobs since April. With most state and local governments dealing with budget shortfalls, we are likely to see continued weakness in job growth. Federal employment will continue its downward trend.

Construction had been showing modest growth last year, but it has added a total of just 7,000 jobs since March. With construction of factories and hotels continuing to slow, and housing construction remaining weak, jobs in the sector will likely be little changed in August.  

Manufacturing has lost 28,000 jobs since January. It is unlikely to reverse this downward trend in August. Restaurant employment has jumped around a bit in recent months, largely due to weather. However, July employment was just 1,800 above the December level. With real spending in restaurants actually falling in July, it is unlikely we will see any notable job gains in August.

The retail sector added 15,700 jobs in July, but this was mostly reversing the decline reported for June. Employment in the sector was still down by 13,400 since April. Finance has added an average of 7,000 jobs over the last three months, roughly the same as its pace over the last year. The professional and technical services sector has been shedding jobs since December, as has the category administrative and support services.

Healthcare will again lead job growth in August. But with cuts to the major government programs kicking in soon, job growth is virtually certain to slow.

Wage Growth Remains Weak

The annual rate of wage growth over the last three months (May, June, July) compared with the prior three (Feb, March, April) was 3.7 percent. This is down from 4.0 percent in 2023 and 2024. This modest slowing is likely to continue into August.

The slowing was more pronounced for the lowest paid workers. The average hourly wage for non-supervisory workers in restaurants rose at just a 2.5 percent annual rate comparing the last three months with prior three months. These workers’ wages tend to be the most responsive to labor market conditions.

Unemployment Rate for Black Workers May Dip

The unemployment rate for Black workers rose a full percentage point from January to July, going from 6.2 percent to 7.2 percent. Meanwhile the white unemployment rate edged up just 0.2 pp (from 3.5 percent to 3.7 percent), which still puts it 0.1 pp below its year ago level.

This sharp divergence is extraordinary. The unemployment rate for Black workers is highly erratic, so the July figure may be partially attributable to measurement error. However, if the rate does not drop in the August report, it will mean we have a serious deterioration in the labor market situation for Black workers in just a half year, which has not thus far had a notable impact on white workers.

Unemployment for Young Workers Likely to Edge Higher

Young workers also have been seeing their labor market prospects deteriorate. The unemployment rate for workers between the ages of 20-24 fell 0.3 pp to 7.9 percent in July, but this is still 2.4 pp above the low hit in April of 2023. Their EPOP for the month was steady at 65.3 percent, but this is 2.9 pp below the peak hit in January of 2024. Young workers are likely to see the effects of a weakening labor market before prime age workers, since many will be just entering the labor market or changing jobs.

Percentage of Unemployment Due to Quits to Remain Low

The share of unemployment due to voluntary quits fell by 1.1 pp in July to 10.7 percent. It averaged 13.2 percent in 2018-19, when the unemployment rate was comparable to the current level. This is another sign of a weak labor market. Workers are apparently reluctant to quit a job without having a new job lined up.

Duration Measures of Unemployment Have Been Worsening

The duration measures of unemployment have all been getting worse in 2025. The median duration of unemployment spells rose to 24.1 weeks in July, the highest level since April of 2022 when it was at 24.8 weeks. The share of long-term unemployed (more than 27 weeks) rose to 24.9 percent, the highest since February of 2022. These measures are likely to worsen further in August.

Foreign-Born Employment Will Continue to Drop

There has been a sharp drop in the number of people reporting they are foreign-born in 2025. Some of this is likely due to the Trump administration’s deportation efforts. However, some of this decline is also due to people either refusing to answer the survey or to not indicating they are foreign-born.

For this reason, the levels will not provide useful information. The ratios for employment and unemployment are still likely to be reasonably accurate. These are up slightly year-over-year (the data are not seasonally adjusted) by roughly the same amount as for the native-born population. Levels for native-born are also meaningless, since they are based on population controls and then subtracting reported foreign-born.

Revisions Likely to be Downward

There is a weak correlation between a current month’s revisions and prior months, which would suggest the revisions to the July data are likely to be downward. Hopefully this will not lead to more firings at BLS. We will also get the preliminary benchmark revision to the establishment data for March 2025 on September 9. This is likely to show job growth was overstated by around 700,000.

Another Weak Jobs Report

The August jobs report is likely to again show weakening in the labor market. The unemployment rate may edge higher to 4.3 or 4.4 percent, while job growth slows to a trickle. This is not a recession story, but also not good news for workers.