Jobs are down, but consumer sentiment—and the stock market—are up, leaving the retail sector to reckon with a host of seeming contradictions and confusing market signals.

Friday saw the release of July’s jobs report from the Bureau of Labor Statistics, showing that the United States lost 23,000 jobs throughout the month after four months of upticks.

This flies in the face of what economists had predicted; those surveyed by Dow Jones said they expected to see 83,000 new jobs. As such, the unemployment rate came down only slightly to 4.1 percent.

Hourly earnings also failed to meet the projections set by economists, growing just 0.1 percent from June—well below the rate of inflation, which was most recently pegged at 3.5 percent, a far cry from the Federal Reserve’s target of 2 percent.

Economist Steve Rattner, the former head of President Barack Obama’s auto industry task force, called the jobs report “shockingly negative.”

“Not only did the economy lose 23,000 jobs in July—the previous estimates for May and June were revised down by 103,000. These numbers are a major red flag indicating the labor market is weaker than previously thought.”

Heather Long, chief economist at Navy Federal Credit Union, called the jobs report “bleak,” adding, “The labor market is stalling again. Many industries shedding jobs or flat.”

Meanwhile, Mark Zandi, chief economist at Moody’s, wrote, “There’s no sugar coating the overarching message in the July jobs report—the economy is struggling.”

Job growth is at a standstill with growth concentrated in just a few sectors, he added, and while unemployment is relatively low, that can be attributed to the fact that “those losing their jobs are leaving the workforce, too discouraged to look for a job, as few businesses are hiring.”

What’s more, hours worked are “slumping” lower and wage growth is decelerating below the rate of inflation, “a clear tell that the job market is operating below full-employment despite the low unemployment rate.”

“No wonder most Americans say they are upset about their finances and the economy’s performance,” Zandi said.

Notably, however, the University of Michigan’s Consumer Sentiment Index rose to 55.2 in its July 2026 survey from 49.5 in June.

As the war with Iran rages on and transit through the Strait of Hormuz is constrained, energy prices remain high (though not quite as high as before). The slight improvement is what U-M economists credit with July’s month-over-month boost of nearly 12 percent.

In its latest survey of American shoppers, improvements in consumer sentiment were seen across all groups regardless of wealth and income, education level and political party. It’s telling to compare the double-digit month-over-month improvement to the year-ago period, however: sentiment is 11 percent lower than July 2025, “reflecting a generally downbeat view of the economy amid five years of elevated inflation and persistent high prices,” analysts wrote.

According to U-M economist Joanne Hsu, July’s improvement in sentiment doesn’t mean shoppers are feeling great about what’s in their pocketbooks.

The director of surveys noted that “consumers do not feel like they are thriving in the current economy,” and while they no doubt appreciate the relative reduction in gas prices (from the highs seen in May), “the continuation of shipping constraints in the Middle East may make it challenging to sustain any upward momentum in confidence.” 

The high state of prices at retail and for necessities remains one of the most pivotal factors impacting consumers’ views of the economy, the U-M study showed. While mentions of high prices eroding personal finances declined from 56 percent in June to 50 percent in July, that’s likely simply because of the decline in gas prices, Hsu said.

Mentions of high prices within the survey are still higher than the 46 percent seen in February (before the war in Iran began) and much higher than the 39 percent seen in July 2025.

“High prices are, by far, the top factor for personal finances cited by consumers and felt most acutely by those with lower incomes,” Hsu said.

So why did the stock market rally on Friday following the shockingly dismal jobs report?

The Nasdaq Composite grew 1.16 percent to 26,653.52, while the the S&P 500 increased 0.54 percent to 7,751.64, and the Dow Jones Industrial Average gained 0.30 percent to 54,044.65.

Investors may have revised their expectations that the Federal Reserve will hike interest rates in September following the release of the labor data. Indeed Hiring Lab senior economist Cory Stahle told CBS News on Friday that the Fed’s chances of holding, rather than raising, the interest rate “went up pretty significantly” due to the revelations in the report.

Stahle said he believes the Fed “might have to think about the timing of a potential rate hike, if not think about some rate cuts… if we continue to see this type of deterioration in the labor market.”