Here’s everything you need to look for in Friday’s July jobs report

Friday’s jobs report could provide a crucial piece to the increasingly complicated puzzle that is the U.S. economy and its long-anticipated slide into recession.

Wall Street prognosticators expect that nonfarm payrolls increased by 200,000 in July, a number that would be the smallest gain since December 2020, while unemployment is projected to hold steady at 3.6%. June saw a gain of 209,000, and the year-to-date total is around 1.7 million.

While slower job growth might fit the narrative that the U.S. is headed for a contraction, other data, such as GDP, productivity and consumer spending, lately have been surprisingly strong.

That could leave the payrolls number as a key arbiter for whether the economy is headed for a downturn, and if the Federal Reserve needs to keep raising interest rates to control inflation that is still running well above the central bank’s desired target.

“This will most likely be a report that has a little bit for everybody, whether your view is skirting recession altogether, a soft landing, or an outright recession by the end of the year,” said Jeffrey Roach, chief economist for LPL Financial. “The challenge is, not every metric is telling you the same story.”

For economists such as Roach, the clues to what the generally backwards-looking report tells about the future lie in some under-the-hood numbers: prime-age labor force participation, hours worked and average hourly earnings, and the sectors where job growth was highest.

The prime-age participation rate, for one, focuses on the 25-to-54 age group cohort. While the overall rate has been stuck at 62.6% for the past four months and is still below its pre-pandemic level, the prime-age group has been moving up steadily, if incrementally, and is currently at 83.5%, half a percentage point above…