Some facts:

• Initial jobless claims remain near historically low levels (see chart ABOVE), suggesting layoffs are still limited. While payroll growth has slowed, businesses continue to retain workers rather than reduce headcount.
• The labor market has increasingly been described as “low-hire, low-fire.” Hiring is modest, but employers are also hesitant to let employees go after experiencing labor shortages over the last several years.
• Unemployment has remained relatively stable despite slower job creation, reinforcing the Fed’s view that employment is not deteriorating in a meaningful way.

What Fed officials have said

John Williams (New York Fed)

• Williams has repeatedly said the labor market remains stable and that current monetary policy is appropriately positioned. He continues to expect inflation to ease while emphasizing that the Fed will respond if inflation fails to move back toward target.

Mary Daly (San Francisco Fed)

• Daly said the Fed was right to leave rates unchanged in July because officials want more data before deciding on September. While she acknowledges uncertainty, she has not described the labor market as a source of concern. Instead, her focus remains on determining whether inflation pressures prove temporary or persistent.

Lisa Cook (Fed Governor)

• Cook noted there is little evidence of widespread AI-driven job losses and said she would support higher rates if inflation does not begin easing. Her comments imply the labor market has remained resilient enough that employment is not currently preventing the Fed from tightening further if necessary.

Neel Kashkari (Minneapolis Fed)

• Kashkari has emphasized that the Fed’s decisions depend on both inflation and employment. He has supported additional tightening because inflation remains above target, while still characterizing the labor market as sufficiently strong to withstand restrictive policy.

US Monthly jobs report will be released tomorrow at 8:30 AM ET.

The July U.S. employment report will be one of the week’s key market-moving events, with economists expecting nonfarm payrolls to rise by about 80,000–85,000, up modestly from June’s 57,000 increase. The unemployment rate is expected to hold steady at 4.2%, while average hourly earnings are projected to remain consistent with a labor market that is cooling gradually rather than weakening abruptly.

Heading into the release, the signals have been mixed. Initial jobless claims remain near historically low levels, pointing to limited layoffs, but Wednesday’s ADP employment report showed a softer-than-expected 44,000 increase in private payrolls, suggesting hiring remains cautious. The prevailing theme continues to be a “low-hire, low-fire” labor market, where employers are slowing hiring but are still reluctant to let workers go.

For the Federal Reserve, a report close to expectations would likely reinforce the view that the labor market remains resilient, allowing policymakers to keep their focus on inflation. A significantly stronger report could increase expectations for a September rate hike, while another downside surprise would raise questions about whether hiring is slowing more than anticipated. As a reference point, the current estimate is for a 56.9% chance of a September rate hike.