July job report expected to show modest payroll gain and steady unemployment rate
Economists forecast July nonfarm payrolls to rise by about 83,000 while the unemployment rate remains at 4.2%, with analysts watching labor-force participation and wage growth for clues on the labor market’s health.
The Labor Department is slated to release July employment data on Friday, with most forecasts pointing to a modest increase of roughly 83,000 nonfarm jobs and an unchanged unemployment rate of 4.2%. The projection follows a June report that added only 57,000 jobs.
Beyond the headline figures, analysts will focus on labor-force participation, wage growth and sector-specific trends. The labor-force participation rate fell to 61.5% in June, the lowest level since March 2021 and the lowest outside the pandemic era since 1976. Participation among workers aged 25 to 54 also slipped to its lowest since December 2023, marking the largest monthly decline outside the early pandemic period.
Federal Reserve officials are monitoring these data points as they balance concerns about inflation with the overall strength of the job market. > "The Federal Reserve's focus is squarely on inflation," said Heather Long, chief economist at Navy Federal Credit Union. "That's the right call, but it's important to keep an eye on whether this economy is creating enough opportunities for young Americans trying to establish a career path."
Fed Governor Lisa Cook noted that low hiring and low layoffs have kept the unemployment rate steady, but warned that this "low-hire, low-fire" environment could dampen sentiment, especially for new entrants to the labor force. She added that if inflation does not improve, she would support a rate hike.
Average hourly earnings are projected to increase 0.3% in July and 3.5% year-over-year, a pace that aligns with the Fed's 2% inflation target. While the Fed typically emphasizes the unemployment rate, the decline in participation has masked a drop of about 833,000 jobs since 2026.
Some economists see a potential shift later in the year. Citi analysts predict the unemployment rate could rise above 4.5% within months, which might prompt a series of rate cuts starting in the fourth quarter of 2024. Vanguard economists, citing 401(k) data, expect a payroll gain of only 18,000 in July and warn that weak hiring could persist into the autumn, particularly affecting younger workers.