US labor market continues to maintain a "low hiring, low layoff" pattern.
The market expects Friday's July nonfarm payrolls report to show about 83,000 new jobs added in the US, with the unemployment rate steady at 4.2%. While job growth has clearly slowed, layoffs remain rare, and the labor market shows no significant signs of deterioration.
For the market, the importance of this report lies more in verifying the pace of economic cooling rather than changing expectations for Federal Reserve policy. Fed Chair Kevin Warsh described the labor market as "stable" last week, and most economists believe inflation trends, rather than employment data, will remain the key variable in determining the direction of monetary policy.
Hiring continues to slow, companies enter cautious employment phase
The US job market showed signs of recovery in the spring, with 214,000 jobs added in March, but the expansion momentum quickly slowed.
Escalating tensions in the Middle East have driven up oil prices, increasing corporate operating costs, leading many companies to tighten hiring plans and prioritize controlling personnel expenses. At the same time, the Trump administration's stricter immigration policies have reduced the available labor pool, further limiting corporate expansion.
Entering summer, the number of job openings continued to decline, with multiple labor market indicators showing hiring activity has stalled. Currently, most companies only fill positions when critical vacancies arise, rather than actively expanding recruitment.
Layoffs remain low, labor market resilience persists
The slowdown in hiring has not triggered widespread layoffs.
At the end of July, the number of Americans filing for unemployment benefits for the first time (not seasonally adjusted) fell to about 175,000, one of the lowest levels in nearly 60 years. The unemployment rate dropped to 4.2% in June, and the market expects it to remain at that level in July.
ADP Chief Economist Nela Richardson noted that labor costs are not the main driver of inflation currently. Worker wages are growing at an annual rate of about 3.5%, having returned to pre-pandemic levels; the market expects average hourly earnings to rise 0.3% month over month in July, with the annual rate remaining at 3.5%.
Many companies remain reluctant to lay off workers easily, partly because skilled labor is still scarce, and the cost of rehiring after cutting staff remains high.
Healthcare remains the main source of job growth
By industry, US job growth remains heavily dependent on the healthcare sector.
Since 2026, hospitals, clinics, and other healthcare service providers have contributed more than half of all new jobs nationwide, a pattern expected to persist in July.
Unlike during economic expansions when most industries increase hiring simultaneously, current job growth is more concentrated in a few sectors, reflecting the overall cautious approach to labor demand among businesses.
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