The July jobs numbers are due out Friday. Here's what to expect
Nonfarm payrolls are expected to post a gain of just 83,000 with an unchanged unemployment rate at 4.2%.
Labor market updates for July are anticipated to be released on Friday, with economists expecting minimal advancements in job growth and the unemployment rate. Nonfarm payrolls are projected to increase by only 83,000, maintaining the unemployment rate at 4.2%. This modest growth follows a sluggish June, which only added 57,000 jobs.
Key factors influencing the job market include participation in the labor force, wage growth, and the sectors driving labor demand. These elements will provide a comprehensive view for Federal Reserve officials, who have been cautiously optimistic about the labor market while concerned about inflation and potential interest rate hikes.
A significant finding from the June report was a sharp decline in labor force participation, dropping to 61.5%, the lowest since March 2021 and lowest since June 1976 outside of the pandemic era. This trend was especially pronounced among the "prime age" workers aged 25 to 54, whose participation rate fell to its lowest since December 2023 and marked the largest monthly decline since April 2020.
Economists will closely monitor whether this trend is a temporary anomaly or a sign of deeper issues in the labor market, characterized by cautious hiring and firing practices that disproportionately affect new entrants to the workforce.
Despite the low hiring rate, the unemployment rate remains steady due to low layoffs. Fed Governor Lisa Cook noted that while the labor market is stable, if inflation does not improve, she would support a rate hike. Fed officials generally pay more attention to the unemployment rate than to the fluctuations in monthly payroll numbers.
However, the low unemployment rate is largely attributed to the decline in labor force participation, resulting in a decrease of 833,000 jobs in 2026. Economists at Citigroup and other institutions believe the Fed's approach may shift later in the year, with a Citi report forecasting three rate cuts between now and January 2027 if the unemployment rate surpasses 4.5%.
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