US Economics: The Daily Update—Low hiring continues

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US Economics: The Daily Update—Low hiring continues

US Economics

01 July 2026 Citi Research

Interest rate markets continue to price in a significant probability of a rate hike in

July and a full hike by the end of the year. Feeding into that pricing is a narrative

that the US economy is overheating based in part on stronger job growth over the

last few months and core PCE inflation that has accelerated above 3%.

Regarding inflation, we see core PCE as the outlier amongst other metrics that

show underlying inflation only slightly above target and not increasing. BEA

downward revisions to core PCE are likely to make that more of a consensus view

by September.

In labor market data, payrolls also appear to be an outlier with other metrics

showing hiring demand that remains soft. Most directly in opposition to the

stronger payrolls readings was yesterday's JOLTS report. The differential between

hiring and separations in May was weaker than reported payrolls, suggesting

downward revisions to May jobs and/or a softer than expected June payrolls figure.

The low hiring rate in JOLTS increased our confidence in our below consensus

projection for 25k new payrolls in June, released tomorrow.

Other labor market data also do not show a risk of retightening. The

unemployment rate has moved sideways at 4.3% and NFIB small business plans to

hire fell to a recent low in June. Wage growth, as measured by the Atlanta fed wage

tracker, continues to cool.

Markets have largely priced out downside risk to employment while keeping upside

risks to inflation priced in. But especially given the dramatic decline in energy

prices, we expect data to reveal the opposite balance of risks in coming months,

starting with tomorrow's jobs report.

Key data today:

10:00 AM