Payrolls report Friday likely to show a jobs market that is still hot

The U.S. jobs market is still on fire, no matter how much effort policymakers put into cooling it off.

Despite a series of interest rate hikes aimed specifically at fixing an imbalance between company demand and the supply of workers, payrolls have been growing by hundreds of thousands of jobs a month, totaling nearly 1.6 million in the first five months of 2023 alone.

A Labor Department report Friday is expected to show that the trend continued through June. The Dow Jones consensus estimate is that payrolls rose by another 240,000, and the unemployment rate is projected to nudge lower to 3.6%.

Those waiting for the jobs picture to deteriorate, then, are going to have to continue to be patient.

“The demise of the labor market has been something that has seemed to be just around the corner for the last nine months or so. It keeps ticking in a way that we didn’t think is possible,” said Thomas Simon, an economist at Jefferies. “I think that we are going to get strong numbers [Friday]. But my longer-term stance is that this is basically the last gasp of strength.”

Lately, however, that has proven a familiar refrain.

Much like economists for the past year or so have been expecting the U.S. to tip into recession any day now, they’ve been looking for the labor market to lead the way. The payroll numbers have managed to beat consensus estimates for all but a few months since January 2022 as companies keep hiring and consumers keep spending.

But with the full impact of 10 rate hikes from the Federal Reserve starting to be felt, there’s growing feeling that a reconciliation is coming.

“Combined with the fact that labor force participation rates are essentially where they were for most of these cohorts before the pandemic, it just suggests to me that there aren’t really that many more people to hire,” Simon said.