Provisional forecast for the July jobs report when it is released on Friday implies a net increase in total employment of 200,000 jobs with an easing in the unemployment rate from 4.1% to 4%. The forecast is a 0.2% increase in average hourly earnings, which should translate to a 3.7% year-ago increase. In addition, the forecast is a 0.2% increase in average hourly earnings, which should translate to a 3.7% year-ago increase. The major swing factor in the report is likely to be seasonal hiring in the leisure and hospitality sector.
July always presents difficult seasonal adjustment challenges to the Bureau of Labor Statistics, and this year will prove no different. The outlook at seasonal jobs openings in the sector suggest a return to 2018-19 levels, so the report is not anticipating an outsized increase in demand for seasonal workers. If the forecast is erroneous, that would suggest the risk of a quicker pace of hiring in the top-line estimate.
The second, and more important, element of the jobs report will be the direction of the unemployment rate, which has been rising as more people, lured by rising wages, enter the workforce. This dynamic is what economists refer to as a virtuous increase in unemployment and one that does not imply the economy is facing near term risk of a recession.
