From June to July, the unemployment rate declined from 4.2% to 4.1%. You might think that means more people have jobs. You might be wrong. The number of people with jobs has actually gone down, not up. How is this happening? Let’s look at the definition of the unemployment rate and the math behind it:
UnemploymentRate = (PeopleInLaborForce – PeopleEmployed) PeopleInLaborForce
PeopleInLaborForce is defined as people who are either working, or are actively seeking employment and are available to work.
When the unemployment rate goes down, TYPICALLY it is because PeopleEmployed goes up. But not now. Currently, PeopleInLaborForce is going down. People who had been actively seeking employment have, for whatever reason, given up and are no longer looking for work.
The number of people employed or seeking employment is actually down by about 380,000 from June to July, and the number of people with jobs has gone down by only 87,000.
There are some complications. The exact thing they surveyed was: Were you employed at any time in the week from June 7th to June 13th, 2026, and from July 12th to 18th, 2026? They make a seasonal adjustment, but for school teachers, some were employed that week, and some weren’t, and the seasonal adjustment may or may not have accounted for that exactly correctly. They are reporting that state and local government employment is down a lot, but some of that may be an artifact of the seasonal adjustments.
The big news is actually that they revised down, significantly, the numbers for both May and June, so they are now saying that the job gains in both of those months are less than what was originally reported.
If you look only at the private sector, jobs are up a little—particularly in health care.
That is also confirmed by ADP. ADP handles payroll processing for companies employing about 26 million people in the United States, which then tries to extrapolate their actual number to the whole country (but only for the private sector, not for government employment).
Based on ADP’s data, people who change jobs are getting material pay increases (avg. 7.0%) more than those who don’t change jobs (avg. 4.4%). That indicates some tightness in at least some parts of the labor market—some employers are paying up to get people from other companies.