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July payrolls badly missed expectations with 23,000 jobs lost versus a projected 93,000 gain, but statistical quirks like seasonal education adjustments and World Cup hiring payback likely overstate the weakness; meanwhile, the household survey showed a falling unemployment rate, no evidence of layoffs, and softening wage growth that is easing some near-term rate-hike expectations.

What caught our eyes this week

The “no hire, no fire” labor market lives on

July payrolls were a big miss: a loss of 23,000 jobs versus expectations for a 93,000 gain. It was not a good report, although we would point to a few statistical quirks that might overstate the negativity. A 50,000 decline in local government education jobs leans heavily on a large seasonal adjustment factor (unadjusted payrolls drop by roughly 1 million every July as schools let out, making for a difficult seasonal adjustment.) Elsewhere, a 40,000 fall in leisure and hospitality jobs looks like payback for temporary World Cup hiring. It appears that two of the largest drivers of the negative print were one-offs, rather than evidence of a new trend. The household survey looked better, with the unemployment rate falling to 4.1%, though with a step down in labor force participation. Evidence of layoffs in the report was nonexistent. Taking the two reports together paints a familiar picture: little hiring, but little firing. Wage growth also continues to soften, which is allowing for a slight unwind of some of the near-term rate hikes that had been priced into markets.

Graph showing monthly change in nonfarm payroll employment from January 2025 through July 2026

CHART OF THE WEEK: Cerity Partners, FRED, CME FedWatch

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