July’s national jobs report shows a labor market losing momentum. For Michigan employers, the bigger concern may be what’s happening beneath the headline unemployment rate: fewer people are participating in the workforce.
By the numbers:
- 23,000 jobs lost nationally in July.
- 4.1% national unemployment rate in July.
- 5.0% Michigan unemployment rate in June — the latest state figure available.
- 59.5% Michigan labor force participation rate in June.
- 124,000 fewer people in Michigan’s labor force compared with a year ago.
Michigan’s July unemployment rate won’t be released until later this month, but the June numbers already point to a significant workforce challenge.
The big picture: July’s national jobs report, alongside the state’s June numbers, is a warning sign for Michigan employers: hiring is slowing, but the worker shortage hasn’t gone away. The U.S. economy lost 23,000 jobs in July, while the unemployment rate dipped to 4.1%. But that decline doesn’t necessarily signal a stronger labor market. Labor force participation fell to 61.4%, with 264,000 people leaving the workforce in July.
Why it matters: Michigan needs more people working – not simply a lower unemployment rate. That’s why the Michigan Chamber supported legislation taking effect this summer requiring unemployed individuals to report three work searches each week (up from one) and providing greater flexibility for employers wishing to participate in the Work Share program. Expanding workforce participation and ensuring workers have the skills employers need will be essential as businesses navigate a slower, more selective labor market. It’s why we also continue to be focused on initiatives that increase participation in the skilled trades and make childcare and workforce housing more affordable.
What this means for Michigan: As the labor market continues to evolve, several indicators will be important to watch – not only to understand where hiring is headed, but whether Michigan has enough workers with the skills and resources employers need to support continued economic growth. Current trendlines suggest:
- The worker pool is shrinking. A lower unemployment rate can mask a deeper workforce challenge when people stop looking for work. For Michigan employers already struggling to find workers with the right skills, a shrinking labor force could make recruiting and retention more difficult — even as overall hiring slows.
- Hiring is becoming more targeted. Job growth is increasingly concentrated in industries tied to continued investment and critical economic needs. Construction and healthcare each added 22,000 jobs nationally in July, while professional and business services added 18,000. At the same time, leisure and hospitality lost 40,000 jobs and retail shed more than 19,000.
- For Michigan, skills matter. The data point to a labor market where employers aren’t simply hiring fewer people — they’re hiring more selectively. Demand is shifting toward transportation, logistics, infrastructure and data center-related work, with data center hiring up 39% year over year. That’s where programs like the Michigan Chamber supported Going PRO Talent Fund can be a win-win for employers and employees alike.
- Wage growth is cooling. Annual wage growth slowed to 3.2% in July, down from 3.4% in June. That may ease some pressure on employers, but persistent inflation continues to affect workers’ purchasing power and employers’ ability to compete for talent.
The bottom line: Michigan businesses are entering the second half of 2026 with a complicated workforce picture – less hiring momentum, fewer workers participating in the labor market and continued demand for talent in key sectors. For employers, the takeaway is clear: don’t assume a cooling labor market means the workforce challenge is over. Recruiting, retention, skills development and workforce participation will remain critical to Michigan’s economic competitiveness.