The U.S. labor market may have taken a hit in July due to a gradual slowdown in the economy and the impact of Hurricane Beryl. The upcoming nonfarm payrolls report from the Labor Department, set to be released on Friday at 8:30 a.m. ET, is expected to show a weaker jobs picture, but the decline is anticipated to be gradual and in line with the Federal Reserve’s goals.
According to experts, the report is likely to reveal a payroll gain of 185,000 for July, which is down from the 206,000 jobs added in June, while the unemployment rate is expected to remain at 4.1%. However, some economists predict that the job numbers could be lower than expected due to the effects of Hurricane Beryl, with estimates ranging from 150,000 to 165,000 payroll gains.
If the unemployment rate continues to rise, there are concerns that the economy may be at risk of triggering the Sahm Rule, which suggests that a recession may be on the horizon. Despite this, Federal Reserve Chair Jerome Powell remains optimistic about the labor market, noting that the balance between supply and demand in the job market has improved in recent months.
Powell hinted at a possible interest rate cut in September if inflation indicators show progress and the labor market remains stable. Market analysts will closely watch Friday’s job report for confirmation of Powell’s assessment, as well as for any signs that the Fed may need to act sooner to prevent a recession.
In addition to the job numbers, investors will also pay attention to the average hourly earnings data in the report for signs of underlying inflation. Economists expect earnings to have risen by 0.3% in July and 3.7% from a year ago, marking the lowest increase since May 2021. Despite this, experts believe that the Fed still has room to cut rates in September if inflation remains under control.
Overall, the upcoming job report will provide valuable insights into the state of the U.S. labor market and its implications for the broader economy. Investors and policymakers alike will be eagerly awaiting the data to gauge the health of the economy and determine the next steps in monetary policy.