The US Bureau of Labor Statistics is due to release its July employment report on Friday, August 1, with economists at major banks forecasting a slowdown in nonfarm payroll growth as businesses respond to fresh tariff pressures. Analysts polled by Reuters expected payroll gains of around 100,000 to 130,000, below the prior three-month average.

The report arrives one day after President Donald Trump's new tariffs on dozens of trading partners took effect following the August 1 deadline. Employers in manufacturing, retail and logistics have cited rising input costs and uncertainty over supply chains, according to surveys published by the Institute for Supply Management earlier in July.

Economists at Goldman Sachs and JPMorgan projected the unemployment rate would hold near 4.2 percent, while average hourly earnings growth was expected to remain around 3.8 percent year on year. Any upside surprise in wages would complicate the Federal Reserve's calculus after policymakers held rates steady at their late-July meeting.

Financial markets were positioned for volatility, with traders weighing whether softer job creation would strengthen the case for a rate cut later in 2026. Fed Chair Jerome Powell said last week that the central bank was monitoring how tariffs feed into both prices and hiring before adjusting policy.

"The labour market is cooling gradually rather than cracking, but tariff-driven cost pressures are now the dominant risk," said Diane Swonk, chief economist at KPMG, in a note to clients ahead of the release.