America's labor market appeared to be gaining momentum this spring, but the latest data suggests that rebound is less convincing. The report indicates a labor market that is less robust than it seemed, with the economy shedding 23,000 jobs in July, the first negative month since February. Revisions dramatically weakened the recent jobs picture, wiping more than 100,000 payrolls from May and June, and the three-month average of monthly job gains has plunged from about 111,000 to just 20,000. The headline decline was heavily distorted by a 50,000 job drop in local government education, which is prone to seasonal volatility, suggesting the decline may reflect statistical noise rather than widespread layoffs. Despite the decline in the unemployment rate to 4.1% in July, the lowest jobless rate in a year, the number of unemployed people fell due to people leaving the labor force rather than finding jobs. The labor force shrank by 264,000 in July, the second straight month of a sizable labor-force decline, with nearly 1 million people out of the labor force in just two months. The jobs report delivered a double whammy for consumers, with weakening hiring and wages failing to keep pace with inflation, which may ease the pressure on the Federal Reserve to raise rates at its September meeting. However, next week's inflation data will still likely be the deciding factor, and if those numbers come in hotter than expected, a cooler labor market may not be enough to quiet the calls for hikes inside the Fed. The market-based odds of a September rate hike fell from 55% to 44% following the release, per CME's FedWatch tool, indicating a shift in expectations. Overall, the labor market looks less solid now than it did before the jobs report, presenting an uncomfortable dilemma for the Federal Reserve as it considers its next move on interest rates.