The Bureau of Labor Statistics releases the June jobs report on Thursday. The report will serve as a key indicator as to whether the Federal Reserve Board will cut interest rates at its meeting later this month.

Fed Chair Jerome Powell and other economists have said there needs to be more evidence that the labor market is cooling before the Fed can consider cutting interest rates.

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The jobs report is one of the last labor market indicators before the July 29-30 Federal Open Market Committee meeting.

Related: Morgan Stanley predicts next Federal Reserve interest rate cut

In a Bank of America Global Research Report, economist Shruti Mishra outlines where the payroll, unemployment and wage numbers are expected to land — and the likelihood of a rate cut.

Federal Reserve Governor Michelle Bowman said last month she would be favor of a July cut in the Federal Funds Rate under certain conditions including the status of the labor market. Photographer: Al Drago/Bloomberg via Getty Images

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Jobs report links to July interest rate cut

Some Fed and market analysts were forecasting that the next probable rate cut of 0.25% could come at the September FOMC meeting.

Then Fed Governors Christopher Waller and Michelle Bowman, both Trump appointees, separately said late last month that a funds rate cut could come as early as the July meeting provided tariff inflation proved to be transitory and the jobs numbers didn’t weaken.

Other economists, including Powell, during a panel discussion of central bank leaders at the Sintra Conference on Tuesday, are not as aggressive.

Powell said the labor market was key in determining when the next U.S. rate cut will happen.

He defended the FOMC’s universal decision to hold the Federal Funds Rate steady at 4.25% – 4.50% in June despite describing the U.S. economy as “stable.”

The reason: Expected inflation this summer from President Donald Trump’s tariffs, currently the highest the nation has seen in nine decades.

Related: Fed official makes surprising interest rate cut prediction

The Fed Funds Rate is tied to the cost of borrowing money. Impacting all aspects of the American economy.

The FOMC’s “wait-and-see” approach to the funds rate reflects the Fed’s dual mandate of prudent monetary policy.

This requires the central bank to regulate the U.S. money supply by keeping inflation in check and the unemployment rate stable.

TheStreet Pro analyst Maleeha Bengali writes that it remains to be seen whether unemployment will increase in June.

More Federal Reserve:

• Fed interest rate cut decision resets forecasts for the rest of this year
• Federal Reserve prepares strong message on long-term interest rates
• Fed official revamps interest-rate cut forecast for this year

“We are entering stagflation times. Inflation is not below the Fed’s 2% target, but it seems the economy will start to need more juice with lower rates,’’ Bengali said.

BofA’s forecast for a July rate cut

The May 2025 jobs report showed:

• Nonfarm payrolls jobs added 139,000 jobs – slightly above the consensus of 130,000, but down from April’s revised 147,000.
• The unemployment rate was stable at 4.2%, continuing a tight range between 4% to 4.2% over the past year.
• Wage growth of average hourly earnings rose 0.4% with a 3.9% year-over-year gain.

Mishra’s note said that June nonfarm payroll jobs will likely rise by 95,000, below the consensus of 110,000, and private payrolls are expected to come in at 90,000.

The payroll slowdown is due to seasonal factors as well as structural. But the structural causes may be more concerning because:

• The summer slowdown in education & health job growth might be worse this year due to the low hiring-low firing labor market status and DOGE impact.
• Weakness in college graduate hiring this summer might also weigh on job growth.
• The recent weakness in air travel and accommodation spending might weigh on the leisure & hospitality sector.

“We expect the (unemployment) rate to rise a tenth to 4.3%,’’ Mishra said. The unemployment rate “will be closely watched in coming months to parse out the supply (immigration restrictions) vs. demand (impact of trade uncertainty/ DOGE actions) shocks to the labor market.”

So will there be an interest rate cut in July?

“In our view, the labor market is moderating rather than deteriorating. Elevated inflation should still keep the Fed on hold,” the note said.

The CME Group FedWatch Tool puts the chance of a July rate cut at 21.2%.  

Related: Fed’s Powell brings blunt message to Congress on interest rates this week