July Jobs Report to Show Moderate Hiring Bounce

Key Takeaways

• Economists forecast a return to healthy job gains in July after a soft reading for June.
• The unemployment rate is expected to remain steady for July.
• Continued solid hiring would come while bond traders expect at least one Fed interest rate increase in 2026.

Economists expect the July jobs report to show a bounce from last month’s softer-than-expected gain in hiring against a backdrop of a healthy labor market. Nonfarm payroll employment is forecast to rise by 100,000, according to FactSet’s consensus estimates. That’s an increase of more than 40,000 from the previous month. The unemployment rate is expected to remain unchanged at 4.2%.

“This is a labor market that is exhibiting stability but not heat, and that’s certainly important from the Fed’s perspective,” says Natixis chief economist Chris Hodge.

A stable jobs market without much in the way of wage gains will keep the Federal Reserve’s attention fixed on inflation data, economists say. Markets expect that the Fed will raise rates at least once before the end of 2026. But with the focus on inflation, economists will be watching the wage data in the jobs report for signs that the labor market’s strength is pushing earnings higher, which could eventually feed upward pressure on prices. “One thing I’ll be looking for is any acceleration in wage growth data,” says Preston Caldwell, senior US economist at Morningstar.

July Jobs Report Forecast Highlights

• Jobs report release date and time: Friday, Aug. 7 at 8:30 a.m. EDT
• Nonfarm payroll employment is forecast to increase by 100,000 in July vs. 57,000 in June, according to FactSet.
• The unemployment rate is forecast to remain at 4.2%.
• The average workweek is forecast to remain at 34.3.
• Hourly earnings are forecast to hold steady at a monthly increase of 0.3%.

Hiring Expected to Increase

Natixis’ Hodge expects roughly 75,000 job additions in July. He thinks the jobs report should show “a bit of a rebound from the prior print, but a fall from where we were in prior months.” Underlying that increase in payrolls, he says healthcare and education should continue their streak of strong job gains. He predicts a “partial rebound” in leisure and hospitality after the World Cup and America 250 hiring boost started to fall off in May.

For Hodge, one key area to watch will be construction, and the degree to which AI-related data center buildouts are boosting employment in the sector. He’s also monitoring for job losses in financial and professional services, where some work could be delegated to AI. As workers leave the labor force, companies may opt to replace some hiring with technological advancements, he explains. Still, he notes that AI currently accounts for just a sliver of the employment picture.

“There’s been slower hiring in [financial and professional services] fields,” Hodge says. “Employment in these sectors hasn’t collapsed in any way, but I think there’s a lot of optimism about what AI is going to be able to do in the future … There’s a little bit more hesitancy in those white-collar sectors that could be outsourced to AI.”

At UBS, economists forecast 70,000 job additions in July, for the unemployment rate to tick up slightly to 4.30%, and for hourly earnings to rise 0.28%. They believe private employment will increase by 90,000, government employment will decline by 20,000, and leisure and hospitality hiring will rebound from June. However, they add that seasonal adjustment “poses upside risks to private employment and downside risks to government employment.”

At Bank of America, the economics team forecasts an 80,000 increase in payrolls, which they call “firm” despite being below consensus. “Benign claims data and steady labor market indicators point to continued job growth, though we see some downside risks from summer distortions, softer ADP data, and a potential reversal in local gov’t hiring,” they wrote last week. “A report in line with our forecast would reinforce the view that downside risks to the labor market have largely faded.”

“Misleading” Low Unemployment Rate

The decline in the unemployment rate since late 2025 has been driven largely by lower labor force participation rather than stronger hiring, according to Natixis’ Hodge. The labor force participation rate fell 0.3 percentage points to 61.5% in June, its lowest level since March 2021. He says that reflects not only retirements but also weaker labor-force entry among prime-age workers aged 25-54.

While Hodge views the current 4.2% unemployment rate as somewhat “misleading,” owing to labor force participation numbers, he thinks a rise in unemployment caused by more people entering the labor force would not necessarily be a negative sign. However, a continued decline in the number of job seekers would be more concerning. “You have a lot of people who are not looking for jobs, and if they were looking, they’d be counted as unemployed, and that would push the unemployment rate up. That’s really troubling if it continues,” he says.

What’s Next for the Fed?

Fed rate hike expectations are shifting slightly with each strong economic data release, favoring at least one rate hike before year-end. According to the FedWatch CME Tool, expectations for a quarter-point hike in the rate target range of 3.75%-4.00% by the Fed’s September meeting are at 56.90%, while expectations that the central bank will keep rates steady are at 43.10%.

Morningstar’s Caldwell says the September Fed meeting will be pivotal, as it will weigh two months’ worth of economic data, since the Fed is not due to meet in August.

Meanwhile, bond market futures show a 43.3% chance of a quarter-point hike by the December meeting and a 32.7% chance of a larger half-point rate increase by year-end.

Caldwell thinks signs of labor tightening in a declining unemployment rate and rising wages might warrant one or more rate hikes. “If [economic strengthening] plays out over the next few months, that could single‑handedly push the Fed to hike multiple times, even if the inflation data starts to trend [upward],” he says.

Hodge believes markets are becoming more set in expecting the Fed to raise rates after more than seven months of steady policy. That said, with inflation cooling and the labor market not booming, he sees little justification for a rate hike. The labor market is in a “sweet spot” of healthy growth without contributing to inflation pressures. “If we do get a significant uptick in wage growth, that would change that story. But anything outside of the realm of normal really wouldn’t change much from the Fed’s perspective from this particular print,” Hodge says.