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July jobs report signals labor supply issue despite softer payrolls

ETF Trends says unemployment edged down to 4.1% mainly as 264,000 workers left the labor force, while job openings stayed plentiful.

Reported · Written up by our desk · Fund Industry

ETF Trends reviewed the July jobs report and argued that the headline decline in payrolls understates the broader economic picture, framing the weakness more as a labor supply problem than a demand or hiring crisis.

According to the outlet, nonfarm payrolls fell by 3,000, far below the roughly 80,000 expected gain, and the prior two months were revised downward by a combined 103,000. Still, the unemployment rate ticked down to 4.1%, which ETF Trends said was driven primarily by 264,000 workers leaving the labor force rather than layoffs rising materially.

ETF Trends pointed to continued labor market depth, saying layoffs remain historically low and job openings remain plentiful. It also highlighted that a 50,000-job drop in local government education appears heavily distorted by seasonal adjustments around the school year.

The outlet linked the shift to other economic indicators, saying inflation-adjusted personal income turned positive year over year in June for the first time in months. ETF Trends also cited faster real final sales to private domestic purchasers, which it said rose to 3.9% in the second quarter from 1.7% in the first quarter, while noting that July’s softer labor data remains the key item to watch.

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