The US labor market has been steadfast amid various challenges such as high inflation, interest rate hikes, pandemic aftermath, and geopolitical uncertainties that were expected to trigger a recession. Despite these obstacles, monthly job gains have consistently exceeded expectations, keeping unemployment at or below 4% for an impressive 30 consecutive months. However, economists warn that the labor market's current stability may be at risk of weakening.

According to economists, the Bureau of Labor Statistics is set to release employment data for June on Friday morning, and they predict that job gains will remain strong but gradually cool. Experts estimate that the US added 190,000 jobs last month, making it a slight retreat from the robust 272,000 gain recorded in May. Furthermore, the unemployment rate is expected to remain steady at 4%.

While the overall job market continues to demonstrate resilience, there are growing indications of a slowing economy. Consumer spending appears to be tapering off, workers are feeling less secure, and there is a decline in job openings and hiring activity. Particularly concerning is the steady increase in layoff activity observed in recent weeks.

Last week, the Department of Labor reported an estimated 238,000 first-time claims for unemployment benefits, marking a 4,000 increase from the previous week. This rise has brought the four-week average of initial claims to its highest level since August 2023. Additionally, the number of continuing claims has reached its peak since November 2021, indicating that Americans are staying unemployed for longer durations.

Luke Tilley, chief economist at Wilmington Trust, has been closely monitoring the reason for unemployment. He noted that on a three-month average basis, there has been an increase of around 200,000 people compared to the previous year. This metric of permanent job losers is rarely positive during an expansionary period, adding to concerns about the potential weakening of the labor market.

Despite these worrying trends, other measures of layoff activity do not suggest a significant spike. Challenger, Gray & Christmas reported that US-based employers announced fewer job cuts in June compared to May. However, these layoff figures remain considerably higher than last year's numbers.

In analyzing the labor market, experts have also highlighted the importance of immigrants in driving job growth. In 2024, immigrants accounted for 43% of the labor force gain, a figure that surged to 280% in May, compensating for native-born workers leaving the labor force. However, the topic of immigrant job gains has become contentious during the ongoing presidential election.

Meanwhile, wage growth for workers has been slowing down, which is expected to continue in June. Economists forecasted month-on-month wage gains of around 0.3%, a slight decrease from 0.4% in May, with annual gains cooling to 3.9% from 4.1%. This development has been closely monitored by Federal Reserve officials as a potential inflationary pressure.

As the employment data for June is set to be released, economists and market observers will scrutinize the report to gain further insight into the state of the jobs market. While the labor market has exhibited resilience so far, signs of a slowing economy are emerging, raising concerns about its future trajectory.