US Economics: NFP Preview -- Will the July jobs report be another game changer?

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US Economics: NFP Preview -- Will the July jobs report be another game changer?

US Economics

29 July 2026 Citi Research

The last two years, the July employment report has been a bit of a game changer for

market perceptions of the health of the labor market, causing a repricing of Fed rate

cuts to begin in September. In 2024, the unemployment rate had been rising

gradually before jumping from 4.1% to 4.3% in July. In 2025, payroll job growth was

solid but the unemployment rate rebounded from a decline in June and there were

substantial downward revisions to job growth the previous two months.

It is not clear if July data this year will be quite as soft, but we do expect echoes of

last year that would further refute the narrative that the labor market is

retightening and could itself be a source of inflationary pressure. We expect a solid

115k increase in nonfarm payrolls but with a significant likelihood of (maybe

substantial) downward revisions to June, similar to last year. We also expect the

unemployment rate to rise back to 4.3% but with substantial uncertainty due to

changes in labor force participation.

If anything, this should suggest the labor market is not at substantial risk of

retightening, allowing markets and Fed officials to focus on inflation data. We

expect core CPI inflation of 2.2-2.3%YoY by August, monthly core PCE readings

annualizing close to 2%, and 20-30bp of revisions lower to core PCE in September

to price-out the possibility of rate hikes this year. And while labor market data may

still be described as “stable” for now, we expect this to change in just a few months

with the unemployment rate rising above 4.5%. This would shift focus back to the

possibility of rate cuts, with cuts restarting in Q4 in our base case.

Figure 1.