A key government report on Friday is expected to show slowing, but steady, job growth in June, with forecasters increasingly confident that the U.S. economy is cruising in for a "soft landing."

Recent economic signals show that the labor market is normalizing: 

• The nation's unemployment rate has remained at or below 4% for 30 consecutive months.
• Payroll gains have averaged 277,000 in 2024, compared with 251,000 the previous year and 165,000 in 2019, before the pandemic slammed the economy in 2020.
• Job openings, although still higher than in 2019, are trending down in what economists say is a more typical balance between employer demand and the number of available workers. 
• Companies have announced plans to cut roughly 435,000 jobs this year — that is down 5% from the same period in 2023, according to outplacement firm Challenger, Gray & Christmas. 
• Wage pressures are continuing to ease, giving companies more scope to dial back prices. 

What to look for

Forecasters are looking for signs that the pace of hiring is moderating, consistent with slowing inflation, but without falling off a cliff, which would rekindle fears about a severe slump. 

Analysts surveyed by FactSet forecast that employers added 192,000 jobs last month, compared with 272,000 in May. A substantial slowdown in June hiring from earlier this year would further affirm the economy is downshifting, as the Federal Reserve hopes. Starting in 2022, the Fed raised interest rates to their highest level in decades in an effort to tamp down growth and curb inflation.

Unemployment in June is forecast to hold steady at 4%, which would point to stable job growth. To that end, Elise Gould, an economist at the Economic Policy Institute, noted in a report that the jobless rate for young adults is now on par with before the pandemic.

Monthly wage growth in June is also expected to cool to 0.3%, down from 0.4% the previous month, which would align with other recent data suggesting that inflation is gradually fading. 

When will the Fed cut interest rates?

The Fed's central challenge in nursing the economy back to health after the pandemic has been to help balance the supply and demand of workers without tipping the economy into a recession. And so far, the central bank has largely defied critics who predicted that aggressive monetary tightening would lead to a crash.

"The labor market has really proven the doubters wrong,'' said Andrew Flowers, chief economist at Appcast, which uses technology to help companies recruit workers.

In remarks in Sintra, Portugal this week, Fed Chair Jerome Powell said inflation is slowing again after flaring earlier this year, the Associated Press reported. The personal consumption expenditures index — a key indicator closely tracked by the Fed — in May slowed to its smallest annual increase in three years, hiking the odds of the central bank cutting rates by year-end.

That doesn't mean policymakers are quite ready to relent in the fight against inflation. Powell emphasized that central bankers still need to see more data showing that annual price growth is dipping closer to the Fed's 2% annual target, and he warned that cutting rates prematurely could re-ignite inflation. 

"We just want to understand that the levels that we're seeing are a true reading of underlying inflation," Powell said.

Most economists think Fed officials will hold rates steady when they meet at the end of July, while viewing a quarter point cut in September as likely. 

"The Fed is growing more attentive to the downside risks to the labor market, which strengthens our confidence in forecast for the first rate cut in this easing cycle to occur in September," according to Ryan Sweet, chief U.S. economist at Oxford Economics, which also expects another Fed rate cut in December. 

Ian Shepherdson, chief economist at Pantheon Macroeconomics, also expects a quarter point cut in September. That could be followed by deeper cuts in November and December, but only if the labor market weakens more than the Fed currently expects. 

In:
• Jerome Powell
• Interest Rates
• Inflation
• Federal Reserve

Alain Sherter

Alain Sherter is a senior managing editor with CBS News. He covers business, economics, money and workplace issues for CBS MoneyWatch.