* Nikkei falls below 25-day moving average

* Retail stocks tumble after Seven & I Q1 profit decline

By Masayuki Kitano

TOKYO, July 3 (Reuters) - Japan's Nikkei stock average fell 1.8 percent on Friday after bleak U.S. jobs data revived caution about the outlook for the global economy, while retail stocks tumbled after Seven & I Holdings (3382.T: Quote, Profile, Research) reported a drop in quarterly profit.

Shares of oil and gas field developer Inpex (1605.T: Quote, Profile, Research) and other oil-related shares dropped after crude oil prices fell nearly 4 percent on Thursday.

The U.S. Labor Department reported on Thursday that U.S. employers cut 467,000 jobs in June, 100,000 more than Wall Street economists had expected. The unemployment rate hit 9.5 percent, the highest in nearly 26 years. [ID:nN02549309]

"It is hard to be optimistic about the outlook," said Yutaka Miura, senior technical analyst at Mizuho Securities.

"The economy has been improving after deteriorating sharply toward March, but we now need to watch whether this will be sustainable," Miura said.

The Nikkei may face more weakness in the near term, since it has fallen below its 25-day moving average, Miura said, adding that one key for Tokyo shares next week will be whether the Nikkei can hold above the 9,500 level. The 25-day moving average is now around 9,800. The Nikkei .N225 fell 172.95 points to 9,701.54.