(NEW YORK) — Wall Street will be closely watching the new U.S. employment data on Friday, the latest sign of whether the U.S. economy is entering a recession as the Federal Reserve carries out a fight against inflation that aims to slash demand by slowing the economy.

Resilient hiring in recent months has so far withstood a series of borrowing cost increases from the Fed but economists expect that the employment data for July will reveal a marked slowdown.

Evidence of a softening labor market has mounted this week amid layoffs at high-profile companies like Walmart and Robinhood, as well as a government report that showed a steep decline in job openings in June.

The median of economic forecasters anticipate 250,000 nonfarm payrolls were added in July, according to Bloomberg. The figure would mark the lowest monthly gain since December and a significant drop from 372,000 jobs added in June. The unemployment rate stood at a near-historic low of 3.6% in June.

Moreover, the expected figure would signal a departure from the robust hiring sustained over the first half of 2022, during which the economy added an average of 461,000 jobs each month.

“The labor market has been a bright spot in the economy but there are signs that the labor market is clearly cooling,” Daniel Zhao, a senior economist at the career site Glassdoor, told ABC News. “It does seem like the labor market is healthy — even as demand slows, layoffs are still very slow.”

While a hiring slowdown may alarm economists and everyday Americans, the signal of weakening labor demand could relieve pressure on the Fed to sustain its aggressive interest rate hikes. At meetings in each of the past two months, the central bank has increased its benchmark interest rate 0.75% — dramatic hikes last matched in 1994.

Despite a series of borrowing cost increases meant to slash prices, inflation has not only persisted but worsened. Data released last month showed that prices jumped a staggering 9.1% in June, which amounts to the highest inflation rate in more than four decades.

Alarmingly, the price increases have coincided with shrinking economic output. Gross domestic product dropped at an annualized rate of 0.9% in the second quarter after falling 1.6% in the previous quarter.

The recent trend qualifies for the shorthand definition of a recession consisting of two consecutive quarters of GDP decline. But the formal designation of a recession depends on a wider range of metrics weighed by the National Bureau of Economic Research.

So far this year, the tight labor market has offered up a strong corner of the economy. But employment data indicated softening on Tuesday, when a report released by the government showed that job openings fell steeply in June to their lowest level in nine months. The 10.7 million job vacancies reported in June, however, remains an elevated figure.

Meanwhile, a slew of major companies in recent days have announced job cuts or hiring slowdowns. Walmart laid off nearly 200 corporate employees on Wednesday, The Wall Street Journal reported. A day before, Robinhood announced plans to cut 23% of its staff. Tech giants Apple, Amazon and Google-parent company Alphabet have recently announced they will slow hiring.

Still, the overall robust hiring in recent months defies typical conditions for a recession, said Zhao of Glassdoor.

“It would be very unusual to have a recession when we’re still adding several hundred thousand jobs a month,” he said. “Of course, if we have a surprisingly bad report where we see job losses this month, then that could change the picture.”

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