The Labor Department will release the hiring and unemployment figures for July at 8:30 a.m. Eastern time. The monthly report provides one of the better snapshots of the state of the American economy. Here’s what to watch for:
-
Wall Street analysts expect payrolls will have grown by 165,000 jobs last month, fewer than the thumping gains reported for June, but strong enough to keep unemployment edging down.
-
Analysts predicted that average hourly earnings rose by 0.2 percent in July, keeping pace with June’s increase. That would bring the year-over-year rate to 3.1 percent.
-
Even blockbuster employment growth is unlikely to temper the push by Wall Street investors and President Trump for the Federal Reserve to cut interest rates further.
Show me the money
With such low unemployment rates, economists will be looking closely for signs of stronger wage growth. Those at the lower end of the pay scale have benefited the most from the intense competition for workers. Yet pay increases seem far outrun by employers’ complaints about labor shortages.
Average wage growth has kept its nose above the 3 percent mark, but the pace has not moved much in recent months, feeding concerns that growth has plateaued.
“We saw a slight deceleration in the employment cost index,” said Diane Swonk, chief economist at Grant Thornton. “It looks like we’ve hit a peak in wage gains.”
A continued stall could also interfere with efforts by the Fed to keep prices growing at a slow and steady pace.
Will the manufacturing slowdown continue?
Mr. Trump has been a relentless booster for the manufacturing industry, but the sector’s gains have cooled. The Institute for Supply Management reported on Thursday that factory activity had slowed in July.
And in announcing a cut in its benchmark interest rate this week, the Fed’s chair, Jerome H. Powell, said investment and manufacturing were “not growing much.”
Job growth in manufacturing, which leapt up after Mr. Trump’s election, has slowed to a monthly average of 8,000 so far this year. The president’s announcement on Thursday of a 10 percent tariff on $300 billion worth of Chinese goods ratcheted up worries about his aggressive trade policies. A weak showing in July would further raise the anxiety level.
The political implications
The strong monthly employment numbers have helped Mr. Trump make a case that economic growth is one of his signature achievements. At the Democratic debates this week, candidates hoping to challenge the president in 2020 pretty much had to skip over the labor market when looking for the economy’s soft spots.
Senator Bernie Sanders of Vermont, for example, talked about Americans “living paycheck to paycheck” and denounced profitable corporations that avoided paying taxes.
It is a strategy that the president used himself during the 2016 campaign. Although the jobless rate dropped sharply and millions of jobs were created during President Barack Obama’s tenure, Mr. Trump hammered away at the economy’s weaknesses, highlighting job losses in manufacturing and dismissing the government’s job reports as phony.
Democrats will undoubtedly seize on any signs of anemic job and wage growth as evidence of what Senator Elizabeth Warren of Massachusetts calls the “economy’s shaky foundation.”
How strong is strong?
In 2018, the monthly job gains averaged 223,000. But at this point, more than 10 years after the recession ended, smaller numbers do not necessarily signal economic trouble.
“We expect a slowdown in hiring” this far into the expansion, said Gregory Daco, chief economist of Oxford Economics USA. As long as employers create roughly 100,000 jobs each month, the labor market can keep pace with population growth and the jobless rate will hold steady.
“If the economy is truly weakening sharply, jobless claims should be going up,” said Jim O’Sullivan, chief economist at High Frequency Economics, “and that hasn’t happened so far.”