Republicans want to make radical socialism the main issue of the midterm election cycle. They'd better hope they succeed, because if it's the economy, the GOP may end up looking ... stupid.
Job creation fell back again into negative territory in July, according to the latest report from the Bureau of Labor Statistics. The unemployment rate actually improved slightly, but that turns out to be less than optimal as well:
Both nonfarm payroll employment (-23,000) and the unemployment rate (4.1 percent) changed little in July, the U.S. Bureau of Labor Statistics reported today. Employment declined in local government education and retail trade. Employment continued to trend up in health care. ...
Among the unemployed, the number of people on temporary layoff increased by 153,000 to 921,000 in July. The number of permanent job losers changed little at 1.7 million. (See table A-11.)
In July, the number of people jobless less than 5 weeks edged down to 2.0 million and is down by 344,000 over the year. The number of long-term unemployed (those jobless for 27 weeks or more) edged down over the month to 1.8 million but changed little over the year. The long-term unemployed accounted for 25.5 percent of all unemployed people in July. (See table A-12.)
Both the labor force participation rate, at 61.4 percent, and the employment-population ratio, at 58.9 percent, changed little in July. Since January, the labor force participation rate declined by 0.7 percentage point, and the employment-population ratio decreased by 0.5 percentage point. (See table A-1.)
The unemployment rate's improvement resulted from a second consecutive decline in the labor force, this time by 264,000. The "not in labor force" number increased again in July by 381,000. The decline in the workforce numbers acts to lower the unemployment rate by lowering the denominator. The real concern here is the decline in labor force participation over the past seven months. That measure accounts for population and serves as a better metric for job-market health, and both have been going in the wrong direction this year, and over the last several years more broadly.
Not only did the numbers come in negative in July, but the revisions to May and June were significantly downward as well:
The change in total nonfarm payroll employment for May was revised down by 66,000, from +129,000 to +63,000, and the change for June was revised down by 37,000, from +57,000 to +20,000. With these revisions, employment in May and June combined is 103,000 lower than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.)
Even with the decline in labor-force participation rates and the spotty performance of job creation in the past two years, wages have been a bright spot and an indicator of strength outside of the normal metrics. That may be weakening, however, as wages barely budged in July and work hours declined slightly:
In July, average hourly earnings for all employees on private nonfarm payrolls, at $37.62, were little changed (+2 cents). Over the year, average hourly earnings have increased by 3.2 percent. In July, average hourly earnings of private-sector production and nonsupervisory employees, at $32.40, were little changed (+4 cents). (See tables B-3 and B-8.)
The average workweek for all employees on private nonfarm payrolls was unchanged at 34.3 hours in July. In manufacturing, the average workweek was also unchanged at 40.4 hours, and overtime edged down by 0.1 hour to 3.1 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls remained at 33.8 hours. (See tables B-2 and B-7.)
The year-on-year gain still looks decent at 3.2 percent, but it's now running behind year-on-year CPI inflation, which came down to 3.5% in June, the last reported figure.
The Wall Street Journal notes that the loss came primarily from a reduction in government jobs, but the private sector job creation numbers barely registered:
Government job losses pulled July’s numbers into negative territory. But private-sector hiring made a weak showing as well. Overall, private employers added just 30,000 jobs.
In a bright spot likely reflecting the boom in data centers, the construction sector added 22,000 jobs last month. Manufacturing gained 5,000. But leisure and hospitality employers cut 40,000 workers, while retailers shed more than 19,000 employees.
Private-sector education and healthcare jobs grew by 25,000, a relatively weak showing for what has been a big source of new jobs over the past year.
There is almost nothing that looks good in this report. The only silver lining to this medium-sized cloud might be more reluctance at the Federal Reserve to hike rates in the near term:
The July report, and downward revisions, left the job market looking suddenly shakier, and could give Federal Reserve officials pause before pressing forward with a rate increase some had been considering in September. The numbers paint a somewhat ambiguous picture for the central bank. It aims for lower unemployment, but this month, unemployment fell for the wrong reasons.
Elevated inflation is likely to remain the Fed’s main focus for now. It led three officials to dissent in favor of a rate increase at the Fed’s meeting last month, and others have more recently suggested a rate increase could be the best next move.
Democrats, including DSA-linked candidates, want to make the midterms about Trump, the economy, and Trump and the economy. Add in a dash of anti-Israel sentiment, and their strategy is obvious. Unless the US economy kicks into high gear in August and September, that narrative will likely get a lot of traction. Republicans had better sell the public on the dangers of radical socialism and Hamas sympathizing in large numbers if the economy doesn't break out soon, and it's not at all clear that the GOP strategy will matter more than kitchen-table issues in this kind of economic funk.
Editor’s Note: The 2026 Midterms will determine the fate of President Trump’s America First agenda. Republicans must maintain control of both chambers of Congress.
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