Labor Market Trends: Insights from UKG’s July 2025 Workforce Activity Report

Note: UKG data showing % change in workforce activity month-over-month. 

Source: UKG Ready, U.S. Bureau of Labor Statistics. 

Are Employers Hitting the Hiring Brakes? 

While shiftwork saw a slight increase in July, other labor metrics point to growing employer caution. New hires dropped 3.8%, a sharper decline than June’s 1.6% dip. Worker separations (employees exiting through resignations, layoffs, or retirements) ticked up 1.3%, reversing the 6.4% decrease seen the previous month. This shift suggests businesses are easing off aggressive hiring. 

Nowhere is this more evident than in the public sector. State and local government new hires fell 4.4% and separations plunged 35%, signaling that many agencies have now filled their operational needs. That’s notable because public-sector employment typically holds steady during economic uncertainty and high interest rates. A slowdown in this usually resilient sector may reflect a broader cooling in the labor market and a transition from growth to maintenance mode across industries. 

Wage Gains Slow, But Still Positive Over the Year 

Wages remain a key signal in the evolving labor market. Real (inflation-adjusted) hourly earnings dipped slightly by 0.2% from June to July, but they were still up 1.4% year-over-year, showing that, despite economic pressures, earnings have generally held steady. 

However, wage growth has been uneven. Healthcare and public sector workers saw real wages decline over the past year, down 2.2% and 1.8% respectively, likely due to rising costs and tighter budgets. Meanwhile, other sectors showed strong wage momentum. Financial Services posted a 5.4% year-over-year increase, Distribution and Services climbed 4.8%, and Life Sciences Manufacturing saw a 2.0% annual gain, including a sharp 6.6% jump just from June to July. 

This split in wage trends may help explain broader labor shifts. In sectors where labor costs are rising quickly, employers appear more cautious with scheduling and hiring, weighing their next moves more carefully than earlier in the year. 

Spotlight on Public Sector: A Turning Point? 

Let’s zoom in on the sharp drop in public-sector shiftwork this month. After months of steady gains, state and local government employment appears to have leveled off. The July report attributes this to many agencies reaching full operational staffing post-election, particularly in government support functions. 

This shift comes at a time when public-sector jobs are expected to be a steadying force in the labor market. Typically, when private hiring slows due to higher interest rates or economic uncertainty, public-sector hiring holds steady or even grows. That makes this 2.9-point drop in shiftwork especially notable. It’s not a red flag, but it’s certainly a sign that public agencies may be shifting from expansion to maintenance mode.  

For job seekers looking for public sector roles as a safe harbor, it may be time to reset expectations. Hiring may not be as robust going forward, especially if most agencies have reached their optimal staffing levels for now. 

Retail and Summer Seasonality: A Bright Spot 

On a more upbeat note, the Retail and Hospitality sector offered a seasonal surge in July, with shiftwork increasing by 0.9%. That growth was fueled largely by summer travel and leisure demand. Amusement, gambling, and recreation services spiked by over 15%, while sporting goods and hobby-focused retail jumped nearly 5%. 

This kind of growth is in line with typical seasonal patterns, but it also signals that consumer demand remains fairly strong despite inflation and broader economic jitters. For workers, especially younger or part-time employees, these sectors continue to offer accessible opportunities during the summer months. 

Manufacturing: Momentum Slows, Particularly in Machinery 

Manufacturing, which had seen encouraging gains in May and June, stumbled in July with a 0.9% drop in shiftwork. The biggest losses came from the machinery manufacturing segment, where shiftwork fell a striking 11.8%, and transportation equipment manufacturing, which dropped 4.6%. 

These sharp monthly losses suggest that manufacturers are recalibrating after two months of growth. Whether this is a temporary correction or the start of a longer-term trend remains to be seen, but it does highlight the volatility in sectors that are particularly sensitive to capital investment and global demand cycles. 

The Big Picture: What Should Employers and Workers Take Away? 

So what does all this mean for people trying to make sense of the labor market right now? 

For employers, it’s clear that the labor market is entering a more cautious, measured phase. The days of frantic hiring and open-ended wage hikes are winding down. Employers should stay vigilant, monitoring real-time labor data and watching cost pressures closely. Strategic staffing decisions, especially in industries such as healthcare, manufacturing, and the public sector, will become even more critical as we move into the fall. 

For workers, the takeaway is that while jobs are still available and wages have generally improved over the year, competition is tightening. Opportunities may become more concentrated in specific sectors such as services, retail, and specialized manufacturing, while once-stable areas such as healthcare and government slow down. 

What Does the Latest U.S. Employment Data Tell Us?  

Let’s turn now to where the job market is heading according to the July U.S. Bureau of Labor Statistics Employment Situation Report.   

The U.S. job market slowed again in July, with just 73,000 new jobs added, continuing a months-long stretch of weak growth. The unemployment rate stayed at 4.2%, showing little movement. Most of the hiring came from healthcare (+55,000) and social assistance (+18,000), while the federal government cut 12,000 jobs. Other industries barely budged or registered net negative employment.  

In a concerning twist, May and June job gains were revised down by a combined 258,000, meaning the job market was even weaker than we thought. Wages rose slightly: up 0.3% to $36.44/hour, a 3.9% increase over the year. More people are looking for work for the first time, and long-term unemployment has risen to 1.8 million. While layoffs remain low, the overall picture points to a cooling labor market, especially for new and younger job seekers trying to get their foot in the door. 

In Summary: Resilience, but Not Without Risk 

July’s data paints a picture of a labor market that is steady but shifting. Growth is happening, but it’s uneven. Real wages are rising, but not everywhere. Job opportunities still exist, but they’re moving. 

This is a market that rewards agility and planning. Whether you’re a business leader looking to make your next hire or a worker deciding where to apply next, the message is the same: stay informed, be ready to pivot, and don’t rely on last quarter’s assumptions. 

In uncertain times, real-time data like UKG’s offers a rare and reliable view into what’s actually happening on the ground. And right now, the message is clear: this isn’t a downturn, it’s a reset. And in that reset, there’s room to build stronger, more resilient workforces for the future. 

Download this month’s full Workforce Activity Report along with reports from previous months, and be sure to sign up for our live monthly labor market briefings.