US July Jobs Report Expected to Show Steady Labor Market, 80K Payroll Gain

Washington: The US labor market is expected to show continued resilience in Friday's employment report, with economists forecasting a pickup in job growth for July. Nonfarm payrolls are projected to have increased by 80,000 last month, up from a gain of 57,000 in June, according to a survey of economists. The unemployment rate is seen holding steady at 4.2%.

While the pace of hiring has cooled from the robust spring months, analysts describe the current state as stable rather than weak. Employers are neither rushing to add workers nor resorting to widespread layoffs, a pattern that has held even as the economy navigates geopolitical tensions and shifting domestic demand.

"It still is a relatively steady as she goes situation, not a particularly strong or weak employment market," said Brian Bethune, an economics professor at Boston College. "I certainly don't see a breakout on the upside or any compelling reason on the downside, simply because corporate profits are doing well."

Forecasts for July payroll gains range from as low as 10,000 to as high as 140,000. Even at the consensus estimate, the monthly increase would remain well above the roughly 20,000 to 50,000 jobs economists consider necessary to keep pace with growth in the working-age population. That so-called break-even rate has been lowered by a shrinking labor force amid tighter immigration policies.

Attention will also focus on revisions to May and June payroll figures, which some economists believe could be revised downward. Data from the Job Openings and Labor Turnover Survey has shown softer labor market flows than payroll growth in recent months, particularly in sectors like health care.

Healthcare is expected to lead job gains in July, with leisure and hospitality likely to rebound after a sharp drop of 61,000 in June, the largest since the pandemic. The government attributed that decline to weaker-than-usual seasonal hiring. Manufacturing is expected to see marginal gains, though a pickup is possible after a survey this week showed factory employment hitting a four-year high.

Annual wage growth is forecast to hold steady at 3.5%. Economists say an in-line report would keep a September interest rate cut on the table, especially if the unemployment rate dips to 4.1%.

The Federal Reserve left its benchmark rate in the 3.50%-3.75% range last week, with three policymakers dissenting in favor of a hike. Upcoming inflation data could sharpen the debate over the near-term policy path.

"The downside risks to the labor market that motivated last year's rate cuts have dissipated," said Shruti Mishra, an economist at Bank of America Securities. "Combined with persistently sticky inflation, we think that strengthens the case for reversing those cuts."

The labor force participation rate is expected to bounce back in July after falling to 61.5% in June, a more than five-year low. The decline was driven by a 0.6 percentage point drop in the prime-age group, for which economists see no clear explanation.

Even with a stable headline picture, those who lose their jobs are facing longer spells of unemployment. The average duration of joblessness is near four-year highs, and college graduates are also struggling to find work.

"We're seeing low unemployment and a stable labor market, but a difficult hiring environment for unemployed workers," said Ryan Nunn, director of research for the Budget Lab at Yale.