NFP Preview - July 2026

Overview

The June payrolls report is set to be released today at 1330 BST, a day earlier than usual due to the upcoming Independence Day holiday. Analysts anticipate an increase of approximately 113,000 jobs, a decrease from May's 172,000. The unemployment rate is expected to remain stable at 4.3%, while average hourly earnings may rise to 3.5% year-over-year from 3.4%.

Market Expectations

The strong job growth in May presents a challenge for the June report: will the momentum continue, or was May's figure an outlier? A reading close to the consensus would indicate ongoing modest growth in the U.S. job market, suggesting resilience rather than a downturn.

Average monthly job growth this year has exceeded 80,000, and a number below this is not expected. The Atlanta Fed’s GDPNow model forecasts robust GDP growth of 2.5% for Q2, which should support job growth exceeding 100,000. The majority of new jobs are likely to come from the education and healthcare sectors, with notable gains in construction and leisure/hospitality, potentially boosted by high attendance at World Cup games in the U.S.

Impact on Federal Reserve Policy

This payroll report follows comments from the new Federal Reserve Chair, Kevin Warsh, at the ECB’s central bankers conference. He noted moderating inflation expectations and the yet-to-be-seen impact of AI on the job market. Warsh also indicated potential changes in the economic data the Fed prioritizes, suggesting a shift in focus may be on the horizon.

Currently, the market is pricing in a 28% chance of a rate hike at the Fed’s next meeting on July 29. If payrolls exceed expectations significantly (180,000 or more), the likelihood of a rate hike could rise above 50%.

Indicators and Predictions

Lead indicators have been mixed; while the ISM manufacturing employment index showed strength, it remains below 50. The ADP private sector payrolls report was slightly weaker than expected at 113,000. Initial jobless claims have ticked higher but remain low at 224,000.

A downside surprise of 70,000 or fewer jobs could lead to a steepening of the U.S. Treasury curve, with falling 2-year yields and rising long-end yields. A weak payroll number could also recalibrate interest rate expectations, making a July rate hike unlikely if the labor market shows signs of softening.

Outlook for the U.S. Dollar

The upcoming payroll data will significantly influence the U.S. dollar, especially ahead of the June CPI report. The U.S. dollar index is currently at a 14-month high, having risen 2.5% in the past month. A break above 100.50 was a bullish signal, suggesting potential for further gains.

However, the forex market can behave contrarily around payroll reports, with potential for buying the rumor and selling the fact. If payrolls disappoint, a sell-off in the dollar could occur, but as long as the index remains above 100.50, the uptrend is likely to continue.