July Jobs Report Commentary from MBA's Joel Kan

The following is MBA VP and Deputy Chief Economist Joel Kan’s reaction to this morning’s U.S. Bureau of Labor Statistics report on employment conditions in July.

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“This morning’s release showed significant labor market weakening over the past three months, as indicated by job growth down to a gain of 73,000 jobs in July and significant downward revisions to the totals for May and June. Notably, goods-producing industries saw contraction for the third straight month. Service industries involved in trade also saw declines in job growth, potentially a result of the uncertain tariff environment, as businesses either put their activity on pause or pulled back altogether. The downward revisions were larger than usual, totaling 258,000 fewer jobs estimated for the prior two months, which dropped the year-to-date average to 85,000 jobs, around half of the monthly average in 2024.  

“The unemployment rate also showed signs of deterioration, moving slightly higher over the month to 4.2 percent, while labor force participation continued to decline as more workers dropped out of the workforce. Earlier this week, a separate survey showed that job openings, hiring, and voluntary quits were moving lower, consistent with this morning’s report.

“The outlook for inflation and employment remains fragile, and MBA’s forecast is for the unemployment rate to increase to over 4.5 percent by the end of the year, peaking at around 4.8 percent in early 2026, as the economy continues to slow. We expect that this labor marketing softening will prompt the Fed to cut rates twice this year and once in 2026.”