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Here’s everything you need to know about Friday’s big jobs report

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People line up as they wait for the JobNewsUSA.com South Florida Job Fair to open at the Amerant Bank Arena on June 26, 2024, in Sunrise, Florida. 

Joe Raedle | Getty Images

The U.S. labor market may have cooled some in July, as a gradual slowdown in the economy and Hurricane Beryl are expected to have taken some of the steam out of hiring.

Still, even if the Labor Department’s nonfarm payrolls report for July, to be released Friday at 8:30 a.m. ET, does indicate a weaker jobs picture, the decline is expected to be only incremental and in keeping with the type of gentle downshift the Federal Reserve is looking to engineer.

“If the Fed was going to manufacture the soft landing, this is probably what it was going to look like,” said Mike Reynolds, vice president of investment strategy at Glenmede. “You’re seeing just modest on-the-margin weakness in the labor market that [isn’t likely to] spiral out of control into a negative feedback loop.”

Indeed, the report from the department’s Bureau of Labor Statistics is forecast to show payroll gains of 185,000 on the month, down from 206,000 in June, with the unemployment rate holding at 4.1%, according to the Dow Jones consensus estimate. Job reports for the past year and a half have routinely beaten the consensus.

But some economists think the report could be on the light side; Goldman Sachs expects Beryl, which ravaged large parts of Texas, particularly Houston, to pull down the jobs number by 15,000. The firm thinks the total payroll gain will be more like 165,000. Citigroup projects an even lower number — 150,000 on payrolls and a tick higher in the unemployment rate to 4.2%.

Should the unemployment rate keep climbing, it could raise fears that the so-called Sahm Rule is in danger of being triggered. The rule has observed without fail that when the unemployment rate over a three-month period averages half a percentage point higher than the 12-month low, the economy is in recession. A year ago, the jobless level as at 3.5% before it started climbing.

Optimism at the Fed

Job gains have averaged 203,000 a month for the first half of 2024, while the unemployment rate has drifted higher as more workers have come into the labor force and the level of those considered unemployed but looking for work or temporarily laid off has hit its highest level since October 2021.

Fed Chair Jerome Powell on Wednesday noted that the previous disparity between supply and demand in the labor market has come into near-balance. Open jobs now outnumber available workers just 1.2 to 1, down from 2 to 1 a few years ago as inflation roared.

Should the factors continue to come into balance and other inflation indicators show progress, Powell strongly hinted that an interest rate cut could be coming in September.

“Our confidence is growing, because we’re getting good data,” he said at a news conference following the Fed’s policy meeting. “Frankly, the softening in the labor market conditions gives you more confidence that the economy’s not overheating.”

Markets will be watching Friday’s numbers for confirmation that Powell’s view on the labor market is accurate — and that the Fed isn’t overconfident and waiting too long to start lowering rates.

There has been a growing chorus on Wall Street for the Fed to start easing now that most indicators show that the inflation rate is only a short distance from the central bank’s 2% goal. DoubleLine CEO Jeffrey Gundlach, for instance, told CNBC on Wednesday that he thinks the economy already is teetering on recession.

“When we look back at today, …. I kind of believe that we will say that we were in recession in September 2024,” he said.

Eyes on earnings

The Fed at its meeting voted to hold its benchmark overnight borrowing rate in a range of 5.25%-5.5%, where it has been for the past year.

Markets rallied on the news but gave back those gains Thursday following news that unemployment claims rose last week and the manufacturing sector slumped further into contraction.

“By holding off on cutting interest rates today, the Federal Open Market Committee is betting the labor market is strong enough to wait until the fall for confirmation that inflation is returning to 2%,” said Nick Bunker, Indeed Hiring Lab’s economic research director for North America. “Let’s hope it pays off.”

As always, markets also will have eyes on the average hourly earnings portion of the report for signs of underlying inflation.

The forecast is that earnings rose 0.3% on the month and 3.7% from year ago. If the latter is correct, it will represent the lowest earnings increase since May 2021.

“Even if wage pressures were to unexpectedly remain ‘stuck’ or slightly re-accelerate in this report, we think that the progress the Fed has made on inflation thus far means that there should still be an opportunity for the Fed to cut rates in September so long as subsequent data releases (eg July CPI) cooperates,” said BeiChen Lin, investment strategist at Russell Investments.

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Inflation rate slipped to 2.1% in April, lower than expected, Fed’s preferred gauge shows

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Inflation rate slipped to 2.1% in April, lower than expected, Fed’s preferred gauge shows

Inflation barely budged in April as tariffs President Donald Trump implemented in the early part of the month had yet to show up in consumer prices, the Commerce Department reported Friday.

The personal consumption expenditures price index, the Federal Reserve’s key inflation measure, increased just 0.1% for the month, putting the annual inflation rate at 2.1%. The monthly reading was in line with the Dow Jones consensus forecast while the annual level was 0.1 percentage point lower.

Excluding food and energy, the core reading that tends to get even greater focus from Fed policymakers showed readings of 0.1% and 2.5%, against respective estimates of 0.1% and 2.6%.

Consumer spending, though, slowed sharply for the month, posting just a 0.2% increase, in line with the consensus but slower than the 0.7% rate in March. A more cautious consumer mood also was reflected in the personal savings rate, which jumped to 4.9%, up from 0.6 percentage point in March to the highest level in nearly a year.

Personal income surged 0.8%, a slight increase from the prior month but well ahead of the forecast for 0.3%.

Markets showed little reaction to the news, with stock futures continuing to point lower and Treasury yields mixed.

People shop at a grocery store in Brooklyn on May 13, 2025 in New York City.

Spencer Platt | Getty Images

Trump has been pushing the Fed to lower its key interest rate as inflation has continued to gravitate back to the central bank’s 2% target. However, policymakers have been hesitant to move as they await the longer-term impacts of the president’s trade policy.

On Thursday, Trump and Fed Chair Jerome Powell held their first face-to-face meeting since the president started his second term. However, a Fed statement indicated the future path of monetary policy was not discussed and stressed that decisions would be made free of political considerations.

Trump slapped across-the-board 10% duties on all U.S. imports, part of an effort to even out a trading landscape in which the U.S. ran a record $140.5 billion deficit in March. In addition to the general tariffs, Trump launched selective reciprocal tariffs much higher than the 10% general charge.

Since then, though, Trump has backed off the more severe tariffs in favor of a 90-day negotiating period with the affected countries. Earlier this week, an international court struck down the tariffs, saying Trump exceeded his authority and didn’t prove that national security was threatened by the trade issues.

Then in the latest installment of the drama, an appeals court allowed a White House effort for a temporary stay of the order from the U.S. Court of International Trade.

Economists worry that tariffs could spark another round of inflation, though the historical record shows that their impact is often minimal.

At their policy meeting earlier this month, Fed officials also expressed worry about potential tariff inflation, particularly at a time when concerns are rising about the labor market. Higher prices and slower economic growth can yield stagflation, a phenomenon the U.S. hasn’t seen since the early 1980s.

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German inflation May 2025

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19 May 2025, Berlin: Apricots are sold at a greengrocer for 7.98 euros per kilogram. Grapes and papaya are also on offer.

Photo by Jens Kalaene/picture alliance via Getty Images

Germany’s annual inflation hit 2.1% in May approaching the European Central Bank’s 2% target but coming in slightly hotter than analyst estimates, preliminary data from statistics office Destatis showed Friday.

The print compares with a 2.2% reading in April and with a Reuters projection of 2%.

The print is harmonized across the euro zone for comparability.

So-called core inflation, which strips out more volatile food and energy prices, dipped slightly from April’s 2.8% to 2.9% in May. The closely watched services print meanwhile eased sharply, coming in at 3.4% compared to 3.9% in the previous month.

Energy prices fell markedly for the second month in a row, tumbling by 4.6% in May.

Germany’s consumer price index has been closing in on the European Central Bank’s 2% target over recent months, in a positive signal amid ongoing uncertainty about the economic outlook for Europe’s largest economy.

Domestic and global issues have mired expectations for Germany’s financial future.

One the one hand, U.S. President Donald Trump’s tariffs could damage economic growth, given Germany’s status as an export-reliant country, though the potential impact of such duties on inflation remains unclear. But frequent policy shifts and developments have been muddying the picture.

On the other hand, Germany’s newly minted government is starting to get to work and has made the economy a top priority. Questions linger about when and to what extent the new Berlin administration’s policy plans might be realized.

The ECB is set to make its next interest rate decision on June 5, with traders last pricing in an over 96% chance of a quarter point interest rate reduction, according to LSEG data. Back in April, the central bank had cut its deposit facility rate by 25 basis points to 2.25%.

This is a breaking news story, please check back for updates.

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