WASHINGTON — U.S. nonfarm payrolls unexpectedly declined by 23,000 in July, while job gains for the previous two months were sharply revised downward, according to data released Friday by the Bureau of Labor Statistics.

The unemployment rate fell to 4.1%, but labor force participation continued to decline. Employment growth averaged only about 20,000 jobs per month over the past three months, suggesting that the labor market may be losing momentum.

Following the report, interest-rate swap markets showed that traders reduced the estimated probability of a Federal Reserve rate increase in September to about 40%, down from nearly 60% before the data were released. Short-term Treasury securities rose, although markets continued to price in one rate increase by year-end.

Tom di Galoma, managing director at Mischler Financial Group, said the decline in payrolls was unexpected and made a September rate increase less likely.

BlackRock senior portfolio manager Jeffrey Rosenberg said the downward revisions to earlier payroll figures provided additional evidence of labor market weakness and should not be dismissed.

The Federal Reserve left its benchmark rate unchanged last week, although three officials dissented in favor of an increase. Fed Chair Kevin Warsh has declined to provide specific forward guidance, adding to uncertainty over the policy outlook.

Investors will next focus on the consumer price index scheduled for release Wednesday. Rising energy prices have renewed inflation concerns, making upcoming employment and inflation data crucial to the Fed’s next decision.