The Federal Reserve has been closely eyeing inflation data of late to determine the direction of interest rates, but there is another side to its dual mandate: Maximum employment. In recent months, there have been some interesting developments on that front, with many hoping for more clarity when the latest non-farm payrolls report is released today at 8:30 AM ET.
Industry watch: 88,000 jobs are expected to be added to the U.S. economy in July, according to the consensus estimate, up from the 57,000 added in June's initial print, but down from the 172,000 payrolls added in May. However, the real story should lie in the breakdown of specific sectors. "The one thing that I find a little bit mysterious over the past couple of months is leisure and hospitality," Dan North, senior economist at Allianz Trade North America, said in an interview with Seeking Alpha. Leisure and hospitality declined by 61,000 in June, a month that should have seen strong hiring due to the World Cup. "I think something's wrong there. Something doesn't add up."
Zooming out: For the last couple of years, most job growth has come from the healthcare industry, and in the last two months, about two-thirds of the added jobs were in healthcare. "We've been relying on one industry to grow the economy," North continued. "That's no way to manage things." However, Heather Long, chief economist at Navy Federal Credit Union, has observed a modest amount of broadening recently. "In 2025, the labor market was a one-trick pony with only healthcare hiring," she declared. "So far in 2026, it's been a few-trick pony, with healthcare, professional and business services, transportation and warehousing, retail, and construction doing some hiring." Elsewhere, wage growth in July isn't expected to add to inflationary pressures, with a consensus for average hourly earnings of +0.3% M/M and +3.5% Y/Y, unchanged from June.
More clarification: Another closely watched statistic, the labor force participation rate, could shed further light on the state of the U.S. labor market. "[Compared to the unemployment rate], I think the participation rate, which shows the percentage of the population that's actually driving the economy, is more important," stated Allianz Trade's North, while NFCU's Long also weighed in on the matter. "That [rate] has been creeping down, and that's a worrisome sign. The sudden plunge in workers aged 25 to 34 does not make a lot of sense. It should reverse a lot in the July data." In June, the participation rate fell to 61.5%, marking the lowest level since 1976, excluding the pandemic era.
