Payrolls fall 23,000 in July; Treasury yields dip as hike odds ease

Minus 23,000. That was the change in U.S. payrolls in July, against forecasts of an 80,000 gain, and the government also erased 103,000 jobs from its May and June counts ^{[1, 5]}. The unemployment rate edged down to 4.1% ^[1].

Why it matters: Mortgage rates have climbed for five straight weeks ^[2], while three Fed officials have already voted for a rate increase ^[4]. A softer job market cuts against the case for one. The 10-year Treasury yield fell to 4.65% on Friday from 4.69% on Thursday ^[3], and traders trimmed their bets on a September hike ^[5].

By the numbers

• -23,000: July’s payroll change, after an average monthly gain of 34,000 over the prior 12 months ^[1].
• +63,000 and +20,000: The revised May and June gains, down from 129,000 and 57,000 ^[1].
• 3.2%: Growth in average hourly earnings over the past year, to $37.62 ^[1]. Economists had expected 3.5%, according to Fox Business ^[5].
• 6.69%: Freddie Mac’s 30-year fixed average on August 6, up from 6.43% on July 2 and 6.63% a year earlier; the 15-year eased to 6.01% from 6.04% ^[2].
• 4.65%: The 10-year Treasury yield at Friday’s close, down from 4.75% on July 31 ^[3].

Where the jobs went: Local government education shed 50,000 jobs and retail 19,000 ^[1]. Financial activities lost 14,000, including 9,000 in credit intermediation, and the sector is down 121,000 since May 2025 ^[1]. Health care added 22,000, slower than its 12-month pace ^[1]. The bureau also found the labor force participation rate down 0.7 percentage point since January, to 61.4% ^[1].

Builders held steady, barely. Construction added 22,000 jobs overall, which the bureau called little change ^[1]. Residential building construction was flat at 914,600, down from 928,100 a year earlier, and residential specialty trade contractors, the framers, roofers and electricians on home jobs, numbered 2,349,000, down about 30,700 from July 2025 ^[1].

What it means for buyers and owners:

• This week’s rate quote predates the report. Freddie Mac’s 6.69% average was released Thursday, before Friday’s drop in Treasury yields ^{[2, 3]}. Lenders reprice daily, so quotes after the report can differ from the weekly survey.
• Pay is outrunning home prices. Lawrence Yun, chief economist of the National Association of Realtors, said in a statement that “The unemployment rate is super low at 4.1 percent and ‘help wanted’ signs abound,” and Inman reported that wage growth has topped national home price growth for 18 months ^[6].
• Less tightening risk could help. “A lower risk of additional Fed tightening could help keep a lid on longer-term interest rates and mortgage rates,” Sam Williamson, a senior economist at First American, told Inman ^[6]. Inman also noted that a lower federal funds rate does not guarantee lower mortgage rates ^[6].
• Job security is uneven. Temporary layoffs rose by 153,000 to 921,000 in July, while the number of permanent job losers held at 1.7 million ^[1].

The Fed backdrop: On July 29 the Fed held its target range at 3.50% to 3.75%, and three officials, Beth Hammack, Neel Kashkari and Lorie Logan, voted for a quarter-point increase ^[4]. The statement said inflation “remains elevated relative to the Committee’s 2 percent goal” ^[4]. Our report on that split vote covered how mortgage rates rose around the meeting.

After Friday’s report, CME FedWatch showed a 44.1% chance of a September hike, down from 55% a day earlier, Fox Business reported ^[5]. Inman, checking separately, put it at 41.8%, with no chance of a cut ^[6].

What’s next: Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, said the “weak payrolls print may ease the pressure on the Fed to raise rates at its September meeting,” with next week’s inflation data likely to decide it, according to Fox Business ^[5]. The Fed’s next decision comes September 16, Inman reported ^[6]. The bureau publishes a preliminary benchmark revision to its payroll data on August 28 and the August jobs report on September 4 ^[1].

The other side: Not everyone reads July as a turn. Jeffrey Roach, chief economist at LPL Financial, told Fox Business the “labor market is experiencing an orderly slowdown, and labor stress indicators remain historically low,” and said a falling jobless rate leaves the economy near full employment, which complicates the Fed’s call ^[5]. Yun cited a 3.5% annual consumer price inflation rate ^[6], above the 3.2% pace of wage gains ^[1].