Fitch sees US jobs report easing inflation pressure now

The US jobs report showed wage cooling and uneven jobless rates, giving the Fed a softer inflation signal while raising questions on hiring.

The latest labor reading gave economists two messages at once: payroll momentum appeared weaker than some private indicators had suggested, while wage growth slowed enough to ease part of the inflation concern. Brian Coulton, chief economist at Fitch Ratings, said the figures mean the Fed may not need to focus as heavily on the employment side of its mandate for now.

Coulton pointed to pay trends as the most important detail behind the headline. He said "another striking feature of the recent labor market data has been the slowdown in wage growth," adding that it "will take pressure off inflation, just as oil prices drop sharply."

Wages and oil relieve inflation

The wage signal matters because the Fed is balancing two legal goals: maximum employment and stable prices. If pay growth cools while hiring remains intact, officials have more room to argue that inflation pressure is fading without an immediate labor-market break.

Oil is reinforcing that view. Nationwide Chief Economist Kathy Bostjancic said "Recent declines in oil prices to below $70/barrel should gradually filter into lower gasoline prices and further support consumer spending and the overall economy."

Lower fuel costs can work through household budgets quickly, especially for lower- and middle-income consumers who spend a larger share of income on essentials. The mechanism is direct: cheaper gasoline leaves more cash for services, groceries and discretionary purchases, while also reducing headline inflation measures watched by markets and policymakers.

Jobless rates split by group

The unemployment details showed a mixed picture across racial and ethnic groups. The White unemployment rate fell to 3.6% from 3.8%, while the Black unemployment rate stayed at 6.6%.

The Asian unemployment rate edged up to 3.9% from 3.8%. The Hispanic unemployment rate increased to 5.2% from 5%, a move that suggests the headline jobless rate can mask sharper shifts inside the labor market.

Sal Guatieri, senior economist at BMO, said the decline in the broader unemployment rate may not reflect strong hiring. He said unemployed workers may now have better odds of finding work because there is less competition for jobs, not because employers are adding positions aggressively.

That interpretation also helps explain why job vacancies can rise while hiring looks less sturdy. If fewer people are actively competing for open roles, vacancies may remain elevated even as payroll growth disappoints.

Private labor signals misfire

The report also exposed a gap between official labor data and some alternative estimates. Revelio Labs had estimated June job growth at about 259,000, which would have been the strongest reading since 2023.

The miss matters because investors, economists and policymakers increasingly use private labor indicators to anticipate official releases. A sharp divergence does not make those tools useless, but it raises questions about model timing, coverage and how well private data capture turning points.

Bessent had also said he would not be surprised by a "very strong" jobs number. The weaker official signal now gives the Fed’s data-review work another example of why labor-market measurement has become harder in a shifting economy.

Manufacturing payrolls add a sector-specific caution. Factory employment peaked in January 2023, is down slightly from the start of 2025 and is near levels last seen in 2018, suggesting that a broad factory hiring surge has not arrived.

If wage cooling and oil below $70 hold, the global macro effect would be milder inflation pressure and better real-income support, while Revelio Labs and other data providers face pressure to explain gaps against official releases. For the wider labor-data industry, that path would favor better calibration rather than a loss of relevance.

If hiring weakness deepens instead, the mechanism changes: slower payroll gains would weigh on spending, intensify the Fed’s trade-off and put more scrutiny on industries tied to cyclical demand, including manufacturing. The open questions are whether wage cooling reflects healthier disinflation or softer labor demand, and whether private datasets can catch the next turn faster than they did this one.