In an August 1 report on job growth from the Bureau of Labor Statistics (BLS), U.S. employers added 73,000 jobs in July, with the unemployment rate up slightly at 4.2%. Economists had predicted 100,000-plus jobs would be gained following 19,000 jobs added in May and 14,000 in June—both those numbers based on sharp downward revisions of previous data.
Hours after the release, President Donald Trump announced he was firing the head of the BLS, Erika McEntarfer, making unsupported allegations that data was being manipulated for political purposes. McEntarfer was nominated by former President Joe Biden, but also received overwhelming bipartisan support in the Senate.
Trump had not named a replacement for McEntarfer at press time.
According to this month’s report, employment continued to trend up in healthcare and social assistance. The federal government continued to lose jobs.
“Today’s jobs report complicates the outlook for a Fed rate cut in September,” said Bright MLS Chief Economist Lisa Sturtevant in a statement. “The unemployment rate is higher than a year ago but remains low by historical standards. This week, Chairman Powell said that the unemployment rate was the main number to watch as they evaluate the health of the labor market.”
The unemployment rate has remained in a narrow range of 4% to 4.2% since May 2024. Federal government employment continued to decline in July (-12,000) and is down by 84,000 since reaching a peak in January. A federal hiring freeze was extended from July to October; 154,000 federal employees have taken buyouts and many thousands more have been laid off.
Among the major worker groups, the unemployment rates for adult men (4%), adult women (3.7%), teenagers (15.2%), whites (3.7%), Blacks (7.2%), Asians (3.9%) and Hispanics (5%) showed little change in July. Among the unemployed, the number of new entrants increased by 275,000 in July to 985,000. New entrants are unemployed people who are looking for their first job.
“At 4.2%, it’s not clear that the Fed would say there is an indication of a weakening labor market. In addition, there is other economic data that suggests the economy is still strong,” Sturtevant added. “The most recent GDP report showed the economy grew at a rate of 3% in the second quarter. And while job openings fell in the June JOLTS report, the overall picture is one of a relatively strong labor market. At the same time, inflation has been rising, with the PCE price index showing inflation at 2.8% in June…(t)he housing market is likely going to remain stuck for the third quarter as both prospective buyers and sellers wait for more certainty in the market.”
Mortgage Bankers Association (MBA) VP and Deputy Chief Economist Joel Kan noted that goods-producing industries saw contraction for the third straight month, while service industries involved in trade also saw declines in job growth, potentially a result of the uncertain tariff environment, as businesses either put their activity on pause or pulled back altogether.
“The downward revisions were larger than usual, totaling 258,000 fewer jobs estimated for the prior two months, which dropped the year-to-date average to 85,000 jobs, around half of the monthly average in 2024,” he said. “The outlook for inflation and employment remains fragile, and MBA’s forecast is for the unemployment rate to increase to over 4.5% by the end of the year, peaking at around 4.8% in early 2026, as the economy continues to slow. We expect that this labor marketing softening will prompt the Fed to cut rates twice this year and once in 2026.”
Realtor.com® Chief Economist Danielle Hale opined that the relative stability in the unemployment rate highlighted a phenomenon that Chair Powell called out in comments following the Fed’s July meeting this week. She feels that even as hiring, or labor demand, has slowed, labor supply has also slowed, keeping the labor market relatively balanced. Meanwhile, earnings climbed by 3.9%, modestly above recent readings.
“The job market remains relatively healthy at a level that would be expected to contribute favorably to housing demand,” she said. “However, the housing market is weighed down by persistent unaffordability. Data released this week showed that the homeownership rate dropped to 65% in the second quarter.
“Both the for-sale and rental housing markets are hampered by unaffordability. A steady labor market that powers income growth is necessary for housing demand, but it’s not enough on its own. Housing demand will recover faster if costs soften, either via lower home prices or lower mortgage rates.”
Editor’s note: this story was updated with the news of Erika McEntarfer’s firing at 3:40 p.m. eastern time.
