July Jobs Report Set to Test Fed's September Hike Odds

The July non-farm payrolls report is the clear focus for markets today, with the release due after a softer June figure. The consensus estimate calls for +80k jobs added, down from the previous month's print, and the data will be the first real test of whether the labour market is cooling enough to challenge the Federal Reserve's expected September rate hike.

The June report came in weaker than expected, and analysts are now flagging a few factors that could weigh on the July number. Government payrolls may see a modest drag after an uptick in May, which was linked to poll worker hiring for primary elections, with some retention seen during June. Seasonal factors are also in play. MNI warns that July ranks second in terms of declines in non-farm payrolls, with only the January post-holiday layoffs being larger. The education sector is expected to feel a negative impact from summer holidays.

One area to watch is whether the World Cup provides any boost to private payrolls. That wasn't the case in the June report, with leisure and hospitality or food and drinking places showing weaker signs instead, though today's data could include revisions.

The unemployment rate is estimated at 4.2% in July, unchanged from June. That prior figure came amid a further drop in the labour market participation rate, which hit a 63-month low. Analyst estimates on the headline number are mixed, with a minor dovish skew towards the jobless rate and earnings.