The Jobs Report May Hold Clues to the Durability of Labor Market Strength

The monthly employment report on Friday is projected to show that employers added 190,000 jobs in June, according to a Bloomberg survey of economists. That would be a downshift from the 272,000 jobs added in May.

The economy remains solid overall, with unemployment still low, the stock market hovering at new highs and wage growth outpacing inflation.

But many economists say the labor market is in a sensitive place. Layoffs are near record lows, but a key measure known as the hiring rate — which tracks the number of hires during a month as a percentage of overall employment—has slowed substantially. That means those who lose their jobs are having more trouble finding new opportunities.

Interest rates, which the Federal Reserve has driven significantly higher since 2022, have remained elevated longer than many businesses had hoped. That has made loans for many small businesses more expensive and, in some cases, crimped their ability to expand. Credit card delinquencies have risen among lower-income households contending with the higher prices.

Still, the balance sheets of most businesses and most households remain strong — with a greater cash cushion in checking accounts than in 2019, according to data from Bank of America.

That has also provided a buffer of sorts for Fed officials, who have been cautiously optimistic about the latest data on inflation, which suggested that the pace of price increases might be entering a tolerable groove.

Most analysts expect the Fed chair, Jerome H. Powell, and his fellow policymakers to resist loosening borrowing conditions for businesses and households until they are confident that their inflation-fighting job is done.

“The labor market is healthy enough to allow the Fed to be patient before lowering interest rates,” Nancy Vanden Houten, a lead U.S. economist at the advisory firm Oxford Economics, wrote in a research note this week, “although recent favorable inflation data give the Fed more latitude to respond to any surprising signs of weakness.”