Dogs days of summer? July jobs report likely to show soft pace of hiring.

By Jeffry Bartash

Unemployment rate forecast to stay at a low 4.2%

Job seekers meet with recruiters in Los Angeles.

The U.S. jobs market isn't getting much better for people looking for work - but it's not getting any worse, either.

The July employment report, due out Friday, is expected to reinforce the "low-hire, low-fire" nature of the labor market. Most companies are only filling key positions if they open up, but otherwise they're keeping labor costs down.

Here's what to watch in the July jobs report.

Summer hiring slowdown?

Hiring appears to have softened since a burst of new job creation in the spring. Job openings fell at the start of the summer, and several labor-market reports indicate employment growth stalled in July.

Economists polled by the Wall Street Journal forecast an 83,000 increase in new jobs in July, up from 57,000 in June.

Such an increase would be less than half the average gain in new jobs in the decade prior to the pandemic or in the period of 2022 to 2024. The U.S. has often produced some 200,000 new jobs a month.

Why not any more?

For one thing, the war with Iran and the ensuing rise in oil prices (CL00) (BRN00) and inflation has raised business costs. Companies have responded by holding down their labor expenses - something they can control. They do that by not hiring or leaving some open jobs unfilled.

The Trump administration's restriction on immigration has also sharply reduced the amount of available labor even if companies wanted to add lots of new workers.

Hiring did pick up in the early spring, with job creation climbing to as high as 214,000 in March. Yet whatever momentum that was building appeared to be short-circuited by the war with Iran.

Unemployment

The good part of the low-hire, low-fire economy is the surprisingly low level of layoffs. The unemployment rate fell slightly in June to 4.2%, and it's likely to stay there in July.

One clue: The number of people who applied for unemployment benefits at the end of July fell to an unadjusted 175,000 - one of the lowest levels in 60 years.

Businesses aren't creating lots of jobs, but they don't want to give up valuable employees either in a labor market in which skilled labor is harder than usual to find.

Where the jobs are

Hospitals, doctor's offices and other healthcare providers have created more than half of all the new jobs in 2026. July is likely to show more of the same.

In a vibrant labor market, almost every industry is hiring. That's not the case now, and it hasn't been true for almost two years.

Worker pay

Rising wages for workers has typically been a leading source of inflation when the U.S. has experienced a sharp increase in prices in the past.

Not this time around. Worker pay is rising about 3.5% a year, similar to how fast it was increasing before the 2020 pandemic.

Labor costs simply aren't a source of inflation right now, said Nela Richardson, chief economist at ADP (ADP), the nation's largest payroll processor.

In July, average hourly pay is forecast to have risen 0.3%, leaving the yearly increase at 3.5%.

Fed reaction

The Federal Reserve is worried about inflation, and it could raise interest rates soon to try tamp it down.

The July jobs report is unlikely to play a big role in the Fed's decision. Top Fed officials believe the labor market is "stable," as Chair Kevin Warsh put it last week. The path of inflation will be the central bank's main guide, economists say.

-Jeffry Bartash

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08-06-26 0700ET