US job gains expectedly slow, jobless rate forecast rises to 4.2 per cent

US job growth likely slowed in July, with the unemployment rate forecast rising back to 4.2 percent, but that probably would be insufficient to spur the Federal Reserve to resume cutting interest rates soon as tariffs are starting to fan inflation.

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The anticipated slowdown in nonfarm payrolls in the labour Department's closely watched employment report on Friday would mostly be payback after a surprise surge in state and local government education boosted employment gains in June.

The US central bank on Wednesday left its benchmark interest rate in the 4.25 per cent-4.50 per cent range.

Fed Chair Jerome Powell's comments after the decision undercut confidence the central bank would resume policy easing in September as had been widely anticipated by financial markets and some economists.

Though Powell described the labour market as being in balance because of supply and demand both declining at the same time, he acknowledged that this dynamic was “suggestive of downside risk.” Job growth has slowed amid uncertainty over where President Donald Trump's tariff levels will eventually settle.

Trump on Thursday slapped dozens of trading partners with steep tariffs ahead of a Friday trade deal deadline, including a 35 per cent duty on many goods from Canada.

The White House's immigration crackdown has reduced labour supply as has an acceleration of baby boomer retirements.