Preview of the July Jobs Report

Although most of the traditional data points leading up to the nonfarm payrolls report aren’t out yet, what little we have – including iCIMS’ own MHI – suggests it will be  a strong report, at least for the establishment survey. Here’s what to look for on Friday.

  • 220k payrolls: After the monster 2Q GDP number, all eyes will be on manufacturing payrolls for signs of impact from trade negotiations and the way forward for the US economy. With layoffs subdued and consumer confidence resilient, we are likely to see a “let the good times roll” number on both the headline and the manufacturing component, barring any difficulty seasonally adjusting for the summer factory closures. Looking at the unadjusted data, the annual peak of manufacturing comes very regularly in June, so it’s unlikely to get better for actual factory workers looking for a job.
  • 3.9% unemployment rate: The unemployment rate has slowed its descent significantly since last year, and it is likely to bounce around for a few more months while trending slightly downward by the end of the year. Labor slack has dwindled, yet payroll growth remains more than robust enough to continue absorbing expected entrants to the labor market.
  • 2.6% average hourly earnings (0.2% on the month): The July wage number should be depressed by a quirk of the way the calendar for the BLS survey overlaps with corporate pay periods. Recent jobs reports suggest that, tight as the labor market has become and despite the complexity of the recruiting landscape, employers are still finding ways to source and compete for talent via non-wage labor expenses, including searching for and training up less-educated workers.
  • Financial markets and interest rates: Absent a surprising (but entirely possible) jump in wage growth, investors and policymakers will be looking to the jobs report for signs that fiscal stimulus is getting outweighed by trade-related losses in confidence. That latter possibility is probably several months away at this point. Much of the discussion about monetary policy and in financial markets right now remains on other, distinctly wonky topics, such as the Fed’s balance sheet and role in money markets, or how to estimate and respond to a neutral level of real interest rates. Inflation will be in focus as well, but the primary connect between that issue and jobs is wages.

Preview of the July Jobs Report

Written By

Josh Wright


July 31, 2018


Market Trends

About the Author

As iCIMS’ former chief economist, Josh Wright led a team of data scientists in analyzing emerging trends in the U.S. labor market. With publications ranging from academic journals to national media, Wright previously served as a U.S. economist with Bloomberg L.P., and was a staff researcher at the Federal Reserve.

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