We expect a net gain of 150,000 jobs and an increase in the unemployment rate to 4.2% when the U.S. employment report for July is released on Friday.
We anticipate seasonal factors to slightly overstate the pace of hiring in July as demand for leisure and hospitality workers offsets the slower pace of hiring in state and local governments, which rose by 80,000 positions in June.
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Hiring in the private sector has slowed over the past six months and we expect that to slow further as businesses refrain from adding more workers amid continuing economic uncertainty.
The economy is growing at an underlying pace closer to 1%, slower than the trade-distorted 3% reported in the second-quarter GDP data released on Wednesday.
Beneath the headline jobs number that will be released on Friday, the labor market narrative will be driven in the second half of the year by labor supply concerns as the crackdown on migrant workers continues.
Through June, there were 32.6 million foreign-born workers in the U.S. labor force and that number declined over the past two months.
In our estimation, the decline in foreign-born workers was the primary reason why the unemployment rate fell to 4.1% in June.
