July Jobs Report: How Slow?

The Bureau of Labor Statistics' (BLS) July jobs report will be watched closely for signs the market has made “substantial further progress” toward the Federal Reserve’s employment goals, particularly since the Federal Open Market Committee statement said that the committee “will continue to assess progress in coming meetings.” We now expect the report--which will be released Aug. 6--to show 800,000 job gains for BLS nonfarm payrolls in July as the reopening solidified through the BLS July survey week, which includes the 12th. That's slower than the 850,000 job gains in June and market estimates of 845,000 for July, and our real-time data suggests the labor market has moderated a bit since the June BLS survey week.

The disappointing ADP Employment Report showed private-sector job gains of just 330,000 in July add some risk to our forecast, although this may have been an adjustment after the ADP survey overshot the BLS in the three months through June.

The real question may be whether this is a pause--as reopening may have slowed a little because of the Delta variant, continued supply chain issues, and missing workers--or a true slowing of the jobs market. At this point in time, with so many job openings, we tend to believe it is some combination of the former at play.

Even so, given a still-healthy jobs reading and a decline in initial jobless and continuing claims since the June report, we expect the unemployment rate to dip by 0.2% to 5.7% in July. With more summer schools offering in-person classes, parents now have reason to reenter the jobs market, suggesting that the labor force participation rate may edge back up to 61.7% from 61.6% in June. Average hourly earnings will likely rise by 0.3%, the same as in June, and climb by 0.2% to 3.8% on a year-over-year basis in June.

We expect the jobs market to heal further into the fall as work conditions return to normal, extended unemployment benefits expire, schools reopen, and people return to work, particularly in cities, more confident that the pandemic has been contained. Indeed, we expect the jobs market dating game would finally see more matches in September, but the delta variant may have thrown a wrench in those plans.