If not for the annual summer churn in local school systems, the U.S. job market would have shown growth in July, although the gain would not have been at the level economists expected.

The Labor Department reported today that the economy had a net loss of 23,000 jobs — compared with a consensus forecast of an 80,000-job increase — and the government revised its May and June job gains downward by a total of 103,000, suggesting that the employment market is weaker than experts have been thinking, even in a low-hire, low-fire economy.

The once-a-year drop in school employment after the educational year ends temporarily cost the economy 50,000 jobs in July, although it is significant that the annual school fluctuation was enough to tip the job market into negative territory in July this year.

The government updated its May job total downward by 66,000, to 63,000, and the June increase was revised lower by 37,000, to 20,000 — only 7,000 less than what the July total would be without the school job effects.

The labor force participation rate — the percentage of the population that is in the workforce — fell again, to 61.4%, and is now at its lowest in more than five years, since February of 2021. It could be the reason that the jobless rate fell from 4.2% to 4.1% despite the economy losing jobs overall in July.

“There are a number of forces driving the labor market right now,” Shawn DuBravac, chief economist at the NMMA, told Trade Only Today. “On the surface, the July numbers look extremely weak. Outside of education, we added 27,000 new jobs, which is broadly in line with what we’ve seen over the last 12 months.

“Unemployment fell because once again, the number of people in the labor market contracted,” DuBravac added. “We are at the lowest levels of participation we have seen since the 1970s outside of the pandemic years.”

DuBravac said that the labor supply is contracting about as fast as the labor demand, “which is helping to maintain balance in the labor market. We remain in a low-hire, low-fire environment. Break-even payroll numbers have fallen sharply and are probably in the 20,000 to 30,000 range, which is why we can have negative payroll growth and low unemployment.”

The Labor Department’s report showed that fewer people were looking for work in July. They can only be noticed and counted in the government’s employment statistics if they are actively job-hunting.

“The combination of the economy shedding jobs and labor force participation rate falling to the lowest level in over five years points to the economy losing momentum,” Thom Dammrich, former president of the NMMA, told Trade Only Today. “We are seeing a weakening labor demand and labor supply. Hiring momentum has stalled, and the job market is weakening. According to the St. Louis Fed, the drop in the participation rate came partly from a statistical population revision in January, partly from declines in participation among prime-age workers (25-64) and reflects long-run demographic aging.”

Dammrich said the boating industry should consider this jobs report as real cause for concern.

“Job losses, falling participation and real wages now below inflation signals softening consumer demand, especially for high-commitment purchases like recreational boats,” he said. “Real wages are negative, and that is a demand problem that the boating industry will likely feel in the next six months.”

DuBravac said that household purchasing power is flat, at best, “and declining on the margin at the moment. That is certainly a headwind for major purchases and other big-ticket discretionary categories. There remains a divide between households that are fully employed and seeing income expand and households that are struggling. For example, over a quarter of those who are unemployed have been unemployed for over six months. But I continue to believe that consumer confidence is the biggest driver in big-ticket discretionary purchases right now.”

The two national measures of consumer confidence were mixed in July, with the University of Michigan’s Consumer Sentiment Index rising 10% and The Conference Board’s Consumer Confidence falling slightly.

Ian Wyatt, senior vice president and chief economist at recreational marine lender Huntington Commercial Bank, told Trade Only Today that the economy seems to be reverting to the trend of flat job growth that was true from January 2025 through February of this year, “although a lack of growth in the working-age population means the unemployment rate has been stable and flat despite flat job growth.

“The other piece of the report that was concerning is wage growth falling, and it is now below the rate of inflation,” Wyatt added. “Although consumer spending has been strong this summer, the outlook for spending would weaken if inflation continues to outpace wage growth.”

Wyatt said blue-collar boat buyers are probably feeling pretty good about the economy right now.

“Construction and manufacturing added jobs last month, and some of the strongest wage growth over the past year and the past month was in utilities, oil and gas drilling, manufacturing, and construction,” he said.

Among the economy’s bright spots was the health care sector, a consistent source of growth during the past few years, with a gain of 22,000 jobs in July. The construction industry also added 22,000. Professional and business services added 18,000, transportation and warehousing grew by 9,700, and manufacturing added 5,000 jobs.

On the negative side, the leisure and hospitality sector lost 40,000 jobs, the retail industry lost 19,000, and employment in financial activities, including insurance carriers and the credit intermediation industry, fell by 14,000.

Drew Pope, president of Independent Boat Builders Inc., told Trade Only Today that a 21,000-job loss in the general merchandise retail segment, along with a 26,000-job loss in restaurants and bars (food services and drinking places) are declines in the July report that stand out to him and suggest that consumers are cutting back on spending due to the rising costs of everyday items.

Workers’ wage gains were minimal in July. The Labor Department said workers’ average hourly earnings rose by just 2 cents, or 0.1%, to $37.62, slowing the annual increase to 3.2% and leaving the pace of pay growth below the level of inflation once again. The Personal Consumption Expenditures Price Index — the Federal Reserve’s preferred inflation gauge — rose 3.7% on an annual basis in June.

“While the PCE was still positive for the month of June (declining from May) and the Consumer Sentiment Index rose more than 10% for July, the average consumer is still facing higher prices and has less buying power than they did a year ago, as indicated by inflation outpacing wage growth year over year,” Pope said.

“From a boating industry perspective, it’s not quite time to sound the alarm based on a few metrics — those who are most impacted by a 30%-plus increase in the price of gas, or global food prices hitting a three-year high (UN), are likely grouped in the lower portion of a K-shaped economic curve and are less likely to be in the market for large-ticket items like new boats,” he added. “How these rising costs impact those builders in value-oriented segments or the used-boat market is yet to be seen and worth keeping an eye on if the trends persist.

“There are still bright spots in the economy — with major U.S. stock market indices hitting record highs recently — and buyers with equities exposure may still feel encouraged to make a large-ticket-item purchase like a new boat.

“Rising costs and higher-than-desired inflation are still major concerns for our industry, as we continue to face a shrinking retail market partially brought on by the lack of affordability of new boats,” Pope said. “Suppliers, manufacturers and service providers must continue to focus on efforts to drive innovation and deliver cost savings.”

Perceptions of the labor market remained poor among consumers that The Conference Board surveyed for its July Consumer Confidence Index. The percentage of respondents who said jobs were hard to get fell slightly, to 21.5%, but that is not far from the January 2021 level of 22.8%, the worst mark of the past five years for the think tank’s category.

Dammrich said the Fed finds itself in a tough spot as it watches the economy between now and its next policy meeting in mid-September.

“There are still a lot of data points on jobs and inflation before the next Fed meeting, but if the labor market continues to cool, with wage growth below inflation, it may tilt the Fed toward more caution and a rate cut, or holding steady if inflation ignites.”

DuBravac said that the probability of a rate increase in September dropped notably today because of the employment report.

“Yesterday there was a greater than 50% chance of a 25-basis-point increase, and that now stands below 50%,” he added. “So the market believes that the employment report was bad enough to keep the Fed on the sideline for at least one more month, and I’d agree with that assessment.”

Wyatt agreed that the jobs report lowers the odds of a rate hike at the September Fed meeting.

“The market saw this move the same way, with the yield on the six-month Treasury falling,” he said. “For floorplan costs, this is a positive, and a rate hike by the Fed in September would likely not only raise floorplan costs by 0.25% (or 25 basis points), but it would also be likely the start of a series of rate hikes that could total 50 to 75 basis points.”