Flash Report: July’s Jobless Rate Rises on Softening Employment Conditions
KEY TAKEAWAYS
- The U.S. unemployment rate ticked up to 4.2% in July from 4.1% in June. More precise data show the rate rose to 4.25% from 4.12%, respectively.
- A spike in the number of people looking for their first job mostly explains the rise in July’s unemployment rate.
- Recent jobs data indicate a softening in employment conditions.
Unemployment
July 2025
4.25%
Precise Rate
The U.S. labor market has been remarkably stable since May 2024, and July’s modest increase in the unemployment rate doesn’t alter this pattern significantly. The jobless rate has stayed within a narrow and historically low range of 4.0% to 4.2%, consistent with full employment, during this period.
Job creation, however, has weakened dramatically. Payroll gains in July were only 73,000 jobs, and gains for May and June were revised sharply downward to 19,000 jobs and 14,000 jobs, respectively. This three-month average of 35,000 jobs represents a slower pace of employment growth.
The following analysis focuses on how estimated flows into and out of unemployment during July affected the overall unemployment rate.
DATA HIGHLIGHTS
- While the headline unemployment rate rose to 4.2% in July from 4.1% in the month prior, the unrounded rate shows a slightly larger increase of 0.13 percentage points.
- The increase in the number of new job seekers was driven by a surge in those looking for their first job.
| Average Monthly Change in Unemployment Rate (Percentage Points) |
People Losing or Leaving Their Jobs and Becoming Unemployed |
Unemployed People Finding Jobs |
People Previously Not in the Labor Force Who Are Now Seeking Work |
Unemployed Workers Leaving the Labor Force (e.g. Discouraged Workers) |
|
|---|---|---|---|---|---|
| July 2025 | +0.13 | +1.02 | -1.10 | +1.17 | -0.97 |
| Last 3 Months | +0.02 | +1.02 | -1.11 | +1.08 | -0.98 |
| Last 12 Months | +0.00 | +0.95 | -1.07 | +1.07 | -0.95 |
| SOURCES: Bureau of Labor Statistics and Research staff’s calculations. | |||||
| NOTES: Data are seasonally adjusted. The overall change is based on the precise unemployment rate for these periods; for example, the unemployment rates were 4.2479% in July and 4.1172% in June. The flow components into and out of unemployment add up to the change in unemployment with a negligible residual. See Maximiliano Dvorkin and Serdar Ozkan’s St. Louis Fed On the Economy blog post “The Recent Ins and Outs of Unemployment: Using Flows to Study Labor Market Dynamics” for more information about this method. | |||||
Despite the relatively steady unemployment rate, some modest signs of deterioration in the labor market have emerged. Rather than leading the unemployment rate to rise, weak job creation over the last three months has largely been offset by declining labor force participation, possibly the result of discouraged workers dropping out of the labor force. The labor force participation rate dropped steadily from 62.6% in April to 62.2% in July.
Nevertheless, new job seekers—those who previously weren’t seeking work but now are—mostly accounted for the rise in July’s unemployment rate. Specifically, this shift was driven by an increase in new entrants to the labor force—that is, people trying to land their first job. Other flow components of unemployment remained stable last month, hovering near their 12-month averages. (See the table above.)
Citation
ldquoFlash Report: July’s Jobless Rate Rises on Softening Employment Conditions,rdquo St. Louis Fed On the Economy, Aug. 1, 2025.
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