Unemployment edges lower after more than 700K drop out of labor force

Andrew Dorn Fri, July 3, 2026 at 9:42 PM UTC

0

(NewsNation) — America’s unemployment rate edged lower in June but largely because more than 700,000 people left the labor force.

That pushed the labor force participation rate to 61.5%, down from 61.8% a month earlier and its lowest level outside the pandemic since 1976, according to Labor Department data released Thursday.

People who stop looking for work are no longer counted as unemployed, so a shrinking labor force can drive the unemployment rate lower even if the job market isn’t getting stronger.

Momentum slows: US hiring falls to 57000 in June

In other words, June’s relatively low 4.2% unemployment rate may partly reflect workers giving up on their job searches.

Last month’s drop in participation was concentrated among prime-age workers, particularly adults ages 25 to 34, suggesting retirements weren’t the primary driver.

“A big drop in participation can signal workers are getting discouraged because it’s hard finding a job,” Robin Brooks, a senior fellow at the Brookings Institution, wrote Friday.

Brooks said June’s data fits that pattern and felt like a “much-needed reality check after a series of weirdly strong payroll prints.”

Navy Federal Credit Union chief economist Heather Long also highlighted the sharp drop in prime-age labor force participation but cautioned that it could prove to be a statistical quirk that reverses in the coming months.

Advertisement

Long-term unemployment remains elevated

The unemployment rate has hardly moved over the past year, but many Americans are taking longer to find work.

More than 1.9 million people had been unemployed for at least six months in June, nearly 300,000 more than a year earlier. Their share of the unemployed has risen from 23% to 27% over the past year.

That helps explain why perceptions of the job market remain weaker than the headline numbers suggest.

The 10 college majors with the highest unemployment

Last month, U.S. employers added 57,000 jobs, roughly half of what was expected but not an outright sign the labor market is deteriorating.

Economists are still trying to figure out what normal job growth looks like as slower labor force growth — driven in part by President Donald Trump’s tighter immigration policies — reduces the economy’s monthly “break-even” pace needed to keep unemployment steady.

Harvard economist Jason Furman wrote on X that the latest report points to a “remarkably resilient and stable labor market even in the face of big shocks,” stronger than many expected just a few months ago.

In a video posted Thursday, Justin Wolfers, an economist at the University of Michigan, said the economy still appears to be creating enough jobs to keep unemployment stable, even if the latest report was underwhelming: “The economy’s not sinking, and it’s not surging — we’re treading water.”

Copyright 2026 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

For the latest news, weather, sports, and streaming video, head to NewsNation.

Original Article on Source

Source: “AOL Money”