Where the losses came from
Local government education led the declines, shedding 50,000 positions in July. Retail trade lost 19,000 jobs, with warehouse clubs, supercenters, and general merchandise retailers accounting for most of that drop. Government payrolls overall fell by 53,000 for the month.
Not every sector contracted. Private-sector payrolls rose by 30,000, and health care continued its upward trend. Average hourly earnings rose $0.02 in July, pulling the 12-month increase to 3.2%.
Labor force participation also slipped. The participation rate held at 61.4%, but the BLS noted it had declined by 0.7 percentage points since January. Full details on the household and establishment surveys are available in the BLS Employment Situation release.
Cooling market, warming demand?
The May–June revisions and the decline in participation rate point to a labor market that has been losing momentum since spring, and a shrinking labor force that keeps the headline unemployment rate lower than the underlying job losses would suggest on their own.
A cooling U.S. labor market cuts both ways for outsourcing. Slower wage growth, up just 3.2% year-over-year, eases some cost pressure to offshore. But the 121,000-job decline in financial activities since May 2025 points to real BPO demand from a core client vertical.
Mexico delivery is more exposed to slowing U.S. consumer spending, while Philippines delivery faces more foreign exchange (FX) margin risk if the Fed moves on rates. Providers should watch the Fed’s next moves closely, since rate decisions will shape client budgets and outsourcing appetite in the months ahead.
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Bureau of Labor Statistics. (2026, August 7). THE EMPLOYMENT SITUATION — JULY 2026. Retrieved from https://www.bls.gov/news.release/pdf/empsit.pdf
