Economists expect the US added 3 million jobs and that the unemployment rate declined in June. Here's what to watch in Thursday's report.

• The June nonfarm payrolls report will be released Thursday, July 2, from the Labor Department.
• Economists surveyed by Bloomberg expect that the US economy added 3 million payrolls in June and that the employment rate declined to 12.5%.
• If the report is in line with expectations, it will be the second month of jobs added since the US lost a record 20.5 million payrolls in April due to the coronavirus pandemic.

Businesses in June likely continued to hire as most states across the US went forward with reopening plans following coronavirus-pandemic lockdowns earlier in the year.

Economists surveyed by Bloomberg expect that the US economy added 3 million jobs in June after adding 2.5 million in May, and that the unemployment rate declined to 12.5%. The report is due Thursday, instead of the usual first Friday of the month, because of the Independence Day holiday.

If the report is in line with expectations, it will mark the second month of employment gains and unemployment declines since the US shed a record 20.5 million jobs April and saw unemployment rise to 14.7%. Still, the US labor market will have a long way to go before undoing the damage wrought by the coronavirus pandemic.

"There's quite a bit of work yet here," Joe Brusuelas, chief economist at RSM, told Business Insider. He added that on Thursday, he's "not giving a lot of emphasis to the top line."

Economists have approached forecasting the June report with a certain level of apprehension after the May release dashed expectations by showing more jobs added and lower unemployment than expected. Amid the pandemic, participation rates in the report's surveys have been lower, and a classification error may be giving the unemployment rate a boost.

Still, the report is an important snapshot of the labor market because it includes detailed data of industries that've gained or lost jobs as well as workers by age, race, and education. Here are the top things economists will be watching for on Thursday.

Misclassification error

The misclassification error, which has occurred since March, is that a large amount of people are being classified as employed but absent from work for "other reasons," when they should probably be counted as unemployed on temporary layoff, according to the Bureau of Labor Statistics.

If the workers counted as employed but absent from work for "other reasons" had been classified as unemployed, the unemployment rate would've been five percentage points higher in April and three percentage points higher in May, the BLS said.

In June, all eyes will be watching for further information on the error and how the BLS is handling it. It could make the report more confusing, because if the error is corrected, the unemployment rate could technically go down in June but have a higher headline number than May.

Other unemployment measures

Other than the headline unemployment rate, the jobs report includes broader measures of the labor force that could show further economic pain. One economists watch is called U-6, or the underemployment rate, and it includes all unemployed, people marginally attached to the labor force, and those working part time for economic reasons.

Economists will also be watching for how many people are permanently unemployed in June. One of the early encouraging signs in the pandemic was that many workers were temporarily unemployed, and could thus rejoin the labor force quickly, Ryan Sweet, an economist at Moody's, told Business Insider.

But in May, while the overall unemployment rate declined, the number of permanently unemployed people rose 295,000 to 2.3 million.

"Unfortunately, I think it's still going to continue to rise and that would be a cause for concern," said Sweet.

In addition, industry breakdowns of jobs added and lost, the labor force employment rate, and employment-to-population ratio will be top of mind for economists to further understand how the labor market fared in June.

Race and gender breakdowns

The coronavirus pandemic has exacerbated inequality in the US as it's fallen hardest on women and minority workers, in many cases the most vulnerable to a recession. While unemployment fell in May, it's still elevated, and even higher for Black, Hispanic, and Asian workers than it is for whites.

In addition, women have higher levels of unemployment than men, with Black, Hispanic, and Asian women also seeing higher rates of joblessness than white women.

As the US navigates a recovery while grappling with climbing COVID-19 cases, it's important to focus on "gender disparities within and across races and ethnicities," said Olugbenga Ajilore, senior economist at the Center for American Progress, and Jocelyn Frye, senior fellow with the women's initiative at CAP.

"Any talk of a V-shaped recovery is misguided at best especially given these labor market difficulties for women of color," they said.