The U.S. economy unexpectedly lost jobs in July, adding to signs that the country’s labor market is beginning to slow.

Nonfarm payrolls fell by a seasonally adjusted 23,000 jobs during the month, according to data released by the Bureau of Labor Statistics on Friday.

The figure was significantly weaker than economists had expected. The Dow Jones consensus forecast had projected an increase of 83,000 jobs.

June Jobs Figure Revised Lower

The July decline followed a downwardly revised figure for June, when nonfarm payrolls fell by 20,000 jobs.

The latest data suggests that employers are becoming more cautious about hiring as the U.S. economy loses some of the momentum seen earlier in the year.

The weaker employment figures could increase pressure on policymakers as they assess the health of the labor market and the broader economy.

Unemployment Rate Falls to 4.1%

Despite the decline in employment, the U.S. unemployment rate edged down to 4.1% in July.

However, the improvement in the unemployment rate came alongside another concerning indicator: a decline in the labor force participation rate.

The participation rate fell to 61.4%, its lowest level in more than five years.

The measure tracks the share of the population that is either working or actively looking for work.

Fewer Americans Working or Looking for Jobs

Economists say the falling participation rate provides important context for the headline unemployment figure.

When fewer people participate in the labor force, the unemployment rate can decline even if the overall employment picture is weakening.

The combination of falling payrolls and reduced labor force participation therefore points to a labor market that may be losing strength.

What the July Jobs Report Means

The latest employment figures provide another indication that the U.S. labor market is cooling.

The unexpected loss of 23,000 jobs was far below expectations, while the decline in labor force participation suggests fewer Americans are working or actively searching for employment.

The data will be closely watched by economists, businesses and policymakers as they assess whether the slowdown is temporary or part of a broader weakening in the U.S. economy.