The latest jobs report came in well below expectations — 57,000 nonfarm payrolls added against a forecast of 113,000 — raising real questions about whether the spring hiring recovery has stalled. Virginia and Maine pay transparency laws are also now live. The first 2027 salary increase projections are landing at 3.3% to 3.4%, and AI is reshaping entry-level hiring in ways that will affect talent pipelines for years. Payscale’s own Salary Budget Survey is soon to be released, with data that may tell a different story than other sources. For compensation and HR leaders, there’s a lot to work through.
Below, we synthesize the latest labor market data, policy developments, and research insights most relevant to compensation leaders.
The U.S. economy and labor market
The June 2026 Employment Situation report (released July 2) showed just 57,000 nonfarm payroll jobs added in June, well below the forecast and roughly half the revised May figure of 129,000. The unemployment rate edged down slightly to 4.2%, though a 0.3 point fall in labor force participation to 61.5% may have contributed to this. Professional and business services led gains (+36,000), followed by education and healthcare. Leisure and hospitality shed 61,000 jobs, reflecting weaker-than-usual seasonal hiring. Average hourly earnings rose 3.5% year-over-year to $37.64, a slight tick up from prior months but still within the cooling range. The Bureau of Labor Statistics (BLS) also revised April and May down by a combined 74,000 jobs.
One jobs report doesn’t make a trend, but the miss was hard to ignore, especially given the revised numbers for previous months that were initially well received. Artificial intelligence may be contributing to workforce restructuring within particular occupations and industries, but its direct impact on job displacement is difficult to isolate. Gartner reported that 95% of organizations have deployed AI in some capacity over the past year, but only one in five has seen significant or transformational value, suggesting that AI investment isn’t yet showing up as productivity in the payroll data.
Artificial intelligence in the workforce
A Gartner survey of 110 CHROs found that 22% of organizations have had at least one business leader pause entry-level hiring because of AI automation. The same survey found that 95% have deployed AI in some capacity over the past year, but only one in five has seen significant value from it. The implication is pointed: organizations are cutting the talent pipeline that feeds future leadership before AI has proven it can fill the gap.
Gartner analyst Kaelyn Lowmaster provided the following commentary: “Organizations that respond by cutting their early career talent pipelines altogether risk creating significant workforce challenges down the road.”
Separately, Visa announced it is cutting roughly 2,600 jobs (7% of its workforce), with reductions concentrated in product and technology. CEO Ryan McInerney cited AI-driven efficiency as a primary driver. Visa’s net revenue rose 14% year-over-year in the same quarter the cuts were announced.
AI is clearly influencing workforce planning, but its effects are not uniformly negative or easily isolated in national employment data. A Forrester report found that 55% of employers now regret AI-driven layoffs and plan to reverse them. A Korn Ferry study found that 47% of workers would trust AI to negotiate their pay and benefits, yet more than 40% worried about algorithmic bias in the output. Harness data shows that roughly 25% of enterprise AI spending is wasted without dedicated cost and process ownership. Meanwhile, Meta faced employee backlash and privacy concerns over an AI-related employee-monitoring initiative.
The pattern across all of these is the same: AI innovation, oversight, and skepticism are all in a rapidly evolving tug-o-war.
Pay increase projections and the 2027 salary budget cycle
Compensation planning season is starting and early 2027 projections vary by survey. Data from various advisory firms points to U.S. salary increase budgets stabilizing at 3.3% to 3.6% for 2027. WTW and Gallagher both land in the 3.3-3.4% range, while World at Work and Payscale show higher averages at 3.5-3.6%. Both Payscale and WTW also report that across-the-board raises (“peanut butter pay increases”) are in decline, with more organizations moving toward differentiated, performance-based increases. That shift means a 3.3-3.6% average can mask significant variation: high performers in critical roles may see 5% or more, while others see 2% or nothing. Budget planning built around a single number will miss the actual distribution.
Payscale’s 2026-2027 Salary Budget Survey Report captures granular variation across employee type by organization size, industry, and region.
Likewise, Payscale also just released its Q2 2026 Labor Market and Wage Trends Report, which covers wage growth and demand for top jobs across sectors and job families, which is useful for ensuring budgets cover necessary market adjustments for fast-moving jobs.
Pay transparency legislation and global developments
United States
Two major pay transparency laws went live this month. Virginia and Maine are now in effect, Connecticut follows October 1, and the Supreme Court just handed employers a new regulatory wild card.
Virginia pay transparency legislation (HB 636/SB 215, effective July 1, 2026) went live this month. The law does not establish a minimum employer-size threshold and requires salary ranges in all job postings (public and internal). It also bans salary history questions. Violations carry civil penalties of up to $1,000 for a first offense and $5,000 per subsequent violation. Virginia is one of only a few states where employees can sue directly rather than waiting on government enforcement.
Maine pay transparency legislation (LD 54, effective July 29, 2026) also went live this month, completing New England’s sweep. It applies to employers with ten or more workers, requires salary ranges on all active listings, and gives current employees the right to request their pay range. Employers must retain pay history records for three years post-termination.
Connecticut expanded its law significantly via HB 5003 (Public Act 26-12, effective October 1, 2026). When in effect, all employers must include pay ranges and a general description of benefits in all internal and external job postings, moving from a request-based system to affirmative disclosure. The law also bans “stay or pay” training repayment agreements for all employers. Remote work compliance applies to postings for roles that would report to a Connecticut supervisor, regardless of where the hire is located.
Europe
The EU Pay Transparency Directive deadline of June 7, 2026 has come and gone, and the results confirm what most trackers predicted: a fragmented rollout. Only Slovakia, Italy, Lithuania, and Malta fully transposed the Directive on time—out of 27 member states.
The Netherlands, Sweden, Czech Republic, and Denmark have confirmed delayed implementation until January 2027. Germany hasn’t published a draft. France is targeting after the deadline, with consultations still ongoing.
The European Commission has held firm, confirming it expects full implementation and warning that late states could face infringement proceedings. For now, employers in countries without local transposition face a genuine gray area: courts may still interpret existing discrimination law in light of the Directive’s principles, even without a domestic statute on the books.
Other regulatory updates
One broader development deserves attention. The Supreme Court overturned a 90-year precedent this term, ruling that the president can fire the heads of independent regulatory agencies at will. The decision substantially strengthens presidential removal authority and is already affecting disputes involving officials at agencies including the National Labor Relations Board (NLRB) and Equal Employment Opportunity Commission (EEOC), although its application may differ by agency and position. For employers, the practical effect may be slower enforcement and greater regulatory uncertainty — but the underlying law on discrimination, wage violations, and union activity hasn’t changed. Organizations that reduced compliance activity on the assumption that enforcement won’t come are carrying risk they may not fully see yet.
Separate from transparency law, several states and localities raised their minimum wages on July 1. Organizations with hourly workers in multiple states should confirm their postings, offer letters, and pay structures reflect the current floors before a compliance gap shows up in an audit.
Compensation events
Payscale’s annual Compference takes place September 15-17, 2026. Registration is open now. It’s the only conference built specifically for compensation professionals, covering pay strategy, market data, transparency, and the tools comp teams actually use. If you’re making 2027 budget decisions this fall, it’s worth being in the room.
For other upcoming Payscale events, including webinars, visit the events page. For podcasts, listen to Comp & Coffee.
What employers should do
The July news creates a clear set of priorities for compensation and HR leaders:
Reassess pay equity methodologies
The Supreme Court ruling on independent agency heads introduces uncertainty about EEOC enforcement direction. Use the time to get audits done and documented — not to pause them. Defensible, job-related criteria matter regardless of who’s leading the agency.
Prepare for expanded transparency requirements
Virginia and Maine pay transparency legislation is effective now. Connecticut follows October 1. Audit your job posting library against all three, brief recruiting teams on the remote work scope rules, and document your process in case of a challenge.
Align compensation strategy with a recovering but cautious labor market
June’s miss — 57,000 against a 113,000 forecast — is a signal worth taking seriously. Start 2027 salary budget planning on the right foot with the most relevant data for your organization by leveraging Payscale’s Salary Budget Survey. Differentiated increases by performance and retention risk will stretch tighter budgets further than across-the-board allocations.
Build AI decisions on a better foundation
Gartner’s finding that 22% of organizations have paused entry-level hiring is a pipeline problem, not just a short-term efficiency play. Map the downstream impact on your talent bench before making similar cuts. With 55% of employers now saying they regret AI-driven layoffs, build the decision framework before you need it — not after. And treat Payscale’s upcoming Salary Budget Survey data as a calibration point: the advisory firms reporting 3.3% to 3.4% may not reflect what’s happening in your sector.
How Payscale can help
Payscale Intelligence Cloud is your comprehensive compensation solution, purpose-build on one ecosystem to enable benchmarking at the speed of business, seamless compensation planning, strategic job management, pay transparency, and every other real-world challenge your team faces daily:
- Benchmarking – Get accurate, defensible pay ranges for any role in minutes — with full visibility into the data behind every number.
- Job management – Build and maintain a job structure that flows directly into your benchmarking, planning, and equity workflows.
- Pay transparency - Build confidence in your pay decisions with auditable ranges backed by real market data
- Compensation planning - Move from fragmented spreadsheets to connected workflows when managing pay increase decisions.
Ask for a demo to see how Payscale can help your organization navigate 2027 compensation planning and pay transparency compliance.
