(Bloomberg) -- Forecasters expect a monthly report on US employment to show a step-down in hiring in June alongside a moderation in wage growth.

Payrolls probably rose by 190,000 last month, according to the median estimate in a Bloomberg survey. Average hourly earnings likely increased 3.9% from a year earlier, the least in three years, in the report set to be published Friday by the Bureau of Labor Statistics.

The unemployment rate is seen holding at 4%, the highest level in more than two years.

Such a gradual cooling in the labor market would support Federal Reserve policymakers seeking multiple reductions in interest rates this year. Investors are currently putting good odds that officials on the Federal Open Market Committee will cut rates when they meet in September and December, according to futures.

“Headline payrolls may suggest the Fed can be patient about cutting rates, but the recent rise in the unemployment rate flags more urgency,” Bloomberg economists Anna Wong, Stuart Paul, Eliza Winger and Estelle Ou wrote in a preview of Friday’s release. 

“We think the Fed will have enough evidence by the September FOMC meeting to begin cutting rates,” the economists said.

Here’s what to watch for in key components of the report:

Nonfarm Payrolls

The employment report is made of two surveys: one of businesses, which determines the payroll figures, and the other of households, which is used to calculate the jobless rate. The two have been widely diverging this year, with the business survey painting a much rosier picture of labor demand.

Many Fed officials have emphasized the surprising strength in nonfarm payrolls so far this year. A hiring figure below 200,000 would bring the takeaway more in line with what data from the household survey has showed lately.

May’s surprise 272,000 increase reflected gains across industries, with a diffusion index compiled by the BLS that tracks the breadth of hiring jumping to the highest level since January 2023. A payroll number closer to the June consensus estimate would probably see breadth come back down to levels that have prevailed over much of the past year.

Hourly Earnings

Forecasters expect average hourly earnings rose 0.3% in June after a surprise 0.4% increase in May. That would push the year-over-year rate of change below 4% for the first time since 2021 and add to confidence that inflation is set to keep decelerating.

Labor Force

Economists expect the report to show unemployment remained unchanged at 4% and labor force participation ticked up to 62.6%, reversing May’s decline. The drop in May was concentrated among those between the ages of 20 and 24 and those of ages 55 and older. So-called “prime working-age” participation, which denotes the 25-54 age group, rose in May to the highest level since 2002.

“The weak May household survey results were almost entirely driven by an implausibly massive drop in employment for the 20-to-24-year-old age group,” Stephen Stanley, the chief US economist at Santander Capital Markets, said in a July 3 note. “I expect the May anomalies to unwind in June, yielding a sizable rebound in the employment measure.”

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