US labor force participation falls to lowest since May 2020

The US labor market is showing renewed signs of weakness beneath the surface. The labor force participation rate fell 0.1 percentage point in July to 61.4%, its lowest level since May 2020. Excluding the pandemic period, that is the weakest reading since March 1976.

The July drop was the seventh monthly decline in the past eight months, bringing the cumulative decrease to 1.1 percentage points. In July, 264,000 people left the labor force, following a decline of 720,000 in June, which was the second-largest monthly drop since 2020.

Since November, the US labor force has contracted by more than 2.4 million workers, suggesting the job market is weaker than headline employment data indicates.