Payrolls Preview: July Has Emerged As A Very Poor Month For Jobs

July nonfarm payrolls will be released on Friday 7th August at 08:30EDT; here's what to expect. 

Summary

Economists expect the US economy to add 80k nonfarm payrolls in July, up from June’s 57k, with the unemployment rate seen holding steady at 4.2%, according to Newsquawk. Average hourly earnings are forecast to rise 0.3% M/M, leaving the annual rate unchanged at 3.5% Y/Y. Labor market proxies are mixed: initial jobless claims fell to their lowest level since September 1969 during the survey window, though ADP’s private payrolls figure disappointed in July, skewing risks to the downside for the private payrolls component. Meanwhile, business surveys were similarly divergent, with ISM manufacturing employment returning to growth for the first time in 33 months, while services employment slipped back into contraction. Elsewhere, the Conference Board’s consumer confidence data showed a modest softening in the labor market differential. For the Fed, officials have broadly characterized the labor market as stable, keeping their focus squarely on inflation; a solid payrolls print and steady unemployment rate would likely reinforce that stance.

Expectations

Let's take a closer look at headline number expectations:

• The US is expected to add 80k nonfarm payrolls in July (prev. 57k; vs 3-month average 111k, vs 6-month average 92k, and vs 12-month average 42k). The range of expectations this month is especially broad, from 157K at the high end (MUFJ) to 40K on the bottom (Berenberg). Private payrolls are expected to grow 82K, suggesting a 2K drop for government jobs.
  • Goldman expects payrolls to rise by 75k in July, a touch below consensus of +80k.
    • On the positive side, the bank expects a small further boost from World Cup hiring, which only began to unwind after the July reference period.
    • On the negative side, the alternative measures of job growth Goldman tracks slowed modestly between June and July, payrolls have slowed from their prior trend and missed consensus expectations in July in recent years, and there have also been negative revisions to job growth for prior months. 

• The unemployment rate is seen unchanged at 4.2%.
  • The Chicago Fed’s real-time unemployment rate forecast for July fell to 4.11% vs the BLS value for June at 4.19%.
  • the FOMC’s June projections forecast the jobless rate at 4.3% this year and next, falling back to 4.2% in 2028.
  • Goldman expects the unemployment rate to rise to 4.3% because of modest upward pressure from compositional effects related to the reversal of June’s large decline in participation. 
• Average hourly earnings are seen rising 0.3% M/M in July, matching the prior rate, and the annual rate is also seen unchanged at 3.5% Y/Y;
  • Oxford Economics notes that a quirk of the survey timing creates some upside risks, but even a 0.4% reading would leave annual wage growth at 3.6% Y/Y, which is consistent with the Fed’s inflation target, amid strong productivity growth.
  • Wage pressures are not considered a significant inflation risk at present.

June Revisions

Analysts at Barclays have flagged the potential for revisions to the June data, noting that the June payroll figure was based on barely half the usual survey responses, and that the BLS relied on modelling rather than actual reported data, though the bank is unclear as to what direction the revisions will go. Still, Barclays suggests revisions will likely be large.

Arguing for a weaker report:

• Big data. The alternative measures of employment growth tracked by GS slowed modestly from their prior month’s pace: the indicators tracked averaged +65k, compared to +79k in June.

• A recent pattern of weak July employment reports. In each of the last three years, July payroll growth slowed from its previously stated three-month average (by an average of -66k) and missed consensus expectations (by an average of -35k). Those reports have also been paired with negative revisions to job growth for prior months, with job growth for the prior two months being revised down by an average of 112k

Arguing for a stronger report:

• World Cup hiring. Data from Homebase suggests that employment grew more quickly in World Cup host cities between the June and July reference weeks. That same data suggests that the World Cup boost began to unwind shortly after the July reference period. Historical analysis suggests that the World Cup could boost payroll growth by 10k in July, and that its impact should be concentrated in the leisure and hospitality, professional and business services, and trade and transportation sectors.

• Layoffs. Initial jobless claims averaged 210k in the July payroll month, down from 224k in June. The JOLTS layoff rate was unchanged at 1.1% in June. Announced layoffs reported by Challenger, Gray & Christmas declined by 12k to 33k in July (NSA), the lowest reading since July 2024.
• Government hiring. Goldman's forecast incorporates an assumed 5k increase in government payrolls. After declining for most of the last year and a half, government payrolls have increased by an average of 12.5k/month over the last four months, and government job openings—as measured by both the official data from the JOLTS report and alternative data such as Indeed—have rebounded in recent months (as we discussed here).

Mixed/neutral factors:

• Job availability. Averaging across the measures of job openings from JOLTS, Indeed, n and LinkUp, we estimate that job openings were roughly unchanged in June, and the measures from Indeed and LinkUp were stable in July (Exhibit 4). The Conference Board labor differential—the difference between the percentage of respondents saying jobs are plentiful and those saying jobs are hard to get—edged down by 0.7pt to +3.1 in July.

• Employer surveys. The employment component of Goldman's manufacturing survey tracker increased in July (+0.9pt to 51.9) while the employment component of the services tracker declined (-0.7pt to 49.8). However, the signal from survey data has been less useful (and at times misleading) during the post-pandemic period and thus has little bearing on our payrolls forecast.

Downside Surprise?

Vanguard expects U.S. payrolls rose by just 18k in July, well below consensus (80k), reflecting payback from the strong Spring prints that were boosted by favorable weather, World Cup-related hiring, and an earlier-than-usual ramp-up in local government ex-education hiring. Private sector data (ADP, VG Employment Report) suggest a return of the summer labor softness observed in recent years with a notable deterioration in entry-level hiring, raising the risk that this weakness will extend into the autumn. Survey mechanics in the household survey strongly suggest an increase in the unemployment rate from 4.2 to 4.3% (the model assigns an equal probability of 4.4% vs unchanged at 4.2%). Vanguard's year-end unemployment rate forecast remains 4.6%.

ADP

The ADP’s employment data for July reported 44k payroll increases, missing expectations for 70k, while the prior for June was revised down to 95k from an initially reported 98k. Within the data, the median change in annual pay for job-stayers was again unchanged at 4.4% Y/Y, while the pay change for job-changers jumped to 7.0% Y/Y (from 6.6%). ADP said “job-changers are highly sensitive to real-time economic conditions, and their rapid pay growth implies supply constraints in parts of the labor market,” adding that “typical hiring patterns, meanwhile, are changing as employers react to shifting macro- economic conditions.” Pantheon Macroeconomics said that the data suggests that the risks to the July private payrolls figure is skewed to the downside (exp. is for 80k), though notes that the official data has typically been slightly stronger than ADP’s numbers recently.

Claims Data

In the week that coincides with the BLS survey window, US initial jobless claims eased to 188k, the lowest since September 1969 (and vs 227k into the June jobs data), while continuing claims eased to 1.782mln (vs 1.812mln into the June report). Oxford Economics said that despite the seasonal noise, the trend is encouraging, with low layoff rates, stronger payroll gains, and weak labour supply growth expected to keep the unemployment rate at or below 4.2%.

Business Surveys

Within the ISM manufacturing data for July, the employment sub- index rose to 52.8 (from 49.7), entering growth territory for the first time in 33 months; the report noted that 60% of panellists reported companies were hiring, while 40% said that managing head counts remains the norm. Meanwhile, within the ISM services data, the employment sub-index fell to 47.4 (from 51.2), returning into contraction territory again after only one month in expansion; some of the commentary focussed on AI as a factor, with some reductions in staffing levels coinciding with AI implementation, while others flagged a geographic shift in hiring, with lower employment in the US, and higher in India and other low-cost areas, adding that H-1B visas have increased.

Consumer Confidence

The Conference Board’s gauge of consumer confidence in July saw the labour market differential (jobs “plentiful” minus jobs “hard to get”) falling by 0.7 to +3.1, driven by fewer reporting plentiful jobs (down to 24.6 from 25.5) rather than a rise in jobs hard to get (slipped to 21.5 from 21.7). The report said that forward-looking measures were less negative, however, with those expecting more jobs ahead picking-up to 16.7 (from 15.6), while fewer-jobs expectations edged down. Net labour market expectations improved by 1.3 points, but is still in negative territory.

Fed Policy

Recently, Fed officials have generally framed the labour market as stable: Chair Warsh called it solid and steady; Logan said it was solid and strengthening slightly; Schmid saw it roughly in balance; Paulson and Hammack noted it had stabilised. Barkin was the most cautious, saying it did not feel tight. Instead, officials continue to view inflation as the bigger policy challenge, the part of its mandate which is not at target. Accordingly, any policy response ahead is likely to be driven by progress on inflation. The recent positive geopolitical developments have weighed on energy prices, offering hope that inflation will continue lower ahead, though this is subject to great uncertainty. Still, a strong labour market report could firm the focus on inflation, particularly since officials think that wage pressures are not a significant driver of inflation at the moment, with some analysts suggesting that it could put upward pressure on real yields given Warsh’s remarks that markets have done some of the Fed’s tightening, according to Bloomberg.

Market Reaction

With yields and inflation still the key risks for stocks, JPMorgan's Market Intel desk expects Friday’s NFP to trade as a “good news is bad news” print: a strong jobs number would reinforce higher-for-longer pricing and put upward pressure on rates. After the latest de-escalation headlines, the 2Y has eased from a recent high near 4.35% to ~4.24% (midday Aug 6, 2026). An outsized hawkish surprise in NFP (e.g., >200k) could add upside pressure in yields, weighing on rate-sensitive baskets. Conversely, JPM's Feroli flags technical effects such unwinding of World Cup-related hiring and a rebound in labor force participation could skew July toward a softer payroll print and a higher U-3 unemployment rate. If that comes to fruition, JPMorgan expects equities to respond positively to a moderate NFP miss, as yields ease and policy expectations shift modestly dovish.

Scenario Analysis (from JPM)

NFP prints above 150k. SPX loses 50bp – 1.75%, odds 10%
NFP prints between 100k –150k. SPX loses 50bp to gains 25bp,odds 25%
NFP prints between 60k – 100k. SPX loses 25bp to gains 50bp, odds 30%
NFP prints between 20k – 60k. SPX gains 25bp – 75bp, odds 25%
NFP prints below 20k. SPX loses 1.25% to gains 50bp, odds 10%

What are options pricing?

For options expiring on August 7, 2026, using data from August 6, show a relatively modest 0.7% implied move.