The Unemployment Rate Remains Steady, Total Employment Declines

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Key Points

• The US workforce shank unexpectedly by 23 thousand, despite the unemployment rate staying unchanged.

• The US civilian labor force has declined in recent months meaning that many individuals have either given up on finding employment or retired.

• The foreign born labor force has declined, but not significantly.

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According to the Bureau of Labor Statistics (BLS), there were 23 thousand fewer employees working full-time in July. Despite the slight decline from June, the unemployment rate remained steady at 4.1 percent.

It's not uncommon for the number of workers in the economy to fluctuate on a month-to-month basis. And it's not necessarily alarming to see a slight monthly decline in jobs either.

The economy is always changing and evolving; some industries grow and some shrink, and people may leave their jobs for a number of reasons, including retirement. So, to get a better idea of the real health of the economy, it's better to look at long-term trends and dig deeper into the data to see below just the headline rate.

The chart above shows the monthly change in full-time workers, but also average changes for each year starting in 2021. In 2020, there were huge numbers of job losses; however, in 2021 the economy was recovering quickly and bringing many of those workers back into the fold, averaging over 600 thousand workers per month.

As we get further away from that recession, the economy has been slower to add new jobs. There could be many reasons for this, and it could be interpreted in different ways.

First, as the pool of unemployed workers—those looking for a job but not currently employed— shrinks, a skills matching problem emerges. In other words, it becomes more difficult for employers to find workers with the necessary skills to perform a job.

There could be many other explanations, for instance, a decline in immigration, AI taking away many entry-level jobs, a slowing economy, declining consumer and business optimism, changing age demographics, among other things.

So, what can the data tell us?

There is wide variation in the growth and decline between industries. Healthcare, construction, and business services grew from June to July. The biggest losses were in the government, leisure and hospitality, retail, and financial sectors. And while some of these sectors, like finance, are more susceptible to AI job-related losses, typically government and hospitality jobs should be less likely to be affected. This implies that those losses are driven by other factors.

In November of 2025, the US labor force peaked at about 171.5 million workers; since then it has declined by nearly 2.5 million, while the population has continued to grow. The labor force is defined as those either employed or currently looking for a job.

The foreign-born labor force did shrink from a year ago, declining by about half a million workers. This is likely the result of tighter immigration policies. And while the native-born population has grown by nearly two million people in the last year, it is not enough to offset the declines in the civilian labor force.

The US population continues to age and many of the older workers in the economy will continue to retire. Many countries around the world are struggling with a similar situation where finding enough replacement workers is difficult due to the decline in birth rates, and tighter immigration policies further strain the job markets.