Investing.com – Market players looked ahead to the publication at 12:30GMT, or 8:30AM ET of the U.S. jobs report for the month of June, with focus on labor market strength and the implications for future policy moves by the Federal Reserve (Fed).
The data will be a key factor for determining the Fed’s outlook, especially since it could serve to help clarify whether May’s numbers, showing the weakest job creation since September 2010, were simply transitory.
Complicating the matter will be the return of more than 30,000 Verizon Communications workers who were on strike in May. They’ll be added back to the June report and inflate the headline number.
Some observers also suggested that a low number of firms responded to the May survey which could imply a sizeable upward revision to the weak job creation number that month.
In any case, the June report is expected to show the unemployment rate rise slightly to 4.8% despite an estimated increase of 175,000 nonfarm payrolls (NFPs).
May’s reading of 4.7% unemployment was an eight-and-a-half year low, but the rise expected for June is due to forecasts for more workers to return to labor force in search of work.
Additionally, wage increases will be in focus for their corresponding expect on spending and secondary effects on inflationary pressure. Consensus forecasts average hourly earnings to rise by 0.2%, but a tightening labor market would presumably place upward pressure on wages.
An upbeat employment report would help support the case for the Fed to steadily tighten monetary policy this year, as the Fed meeting minutes from June noted that one of the primary concerns for holding rates in check were the weak labor market conditions revealed in the May jobs report.
According to the June report from ADP, a private firm dealing in payroll services, released on Thursday, the U.S. economy created 172,000 private jobs last month. The data beat expectations for an increase of just 159,000.
While not viewed as a reliable guide for the government jobs report due on Friday, July 8, it does give guidance on private-sector hiring.
Thursday also showed more upbeat employment data as the weekly initial jobless claims showed that the number of people who filed for unemployment assistance in the U.S. last week registered an unexpected decline and continued to remain in territory consistent with a firming labor market.
As far as the Fed's current outlook on normalization of monetary policy and prior to the release, markets put the odds at 96.4% that the central bank would keep rates unchanged at the July 26-27 meeting, with the probability of a 25 basis point (bp) cut at 3.6%.
According to CME Group’s FedWatch Tool, markets do not currently expect the Fed to tighten until well into 2017.
Late Thursday, Fed fund futures put the odds at 96.4% that the central bank would keep rates unchanged at the July 26-27 meeting, with the probability of a 25 basis point (bp) cut at 3.6%.
According to CME Group’s FedWatch Tool, markets do not currently expect the Fed to tighten until well into 2017.
While waiting for the publication of the data, the dollar edged lower. The US dollar index, which tracks the greenback against a basket of six major rivals, was down 0.10% at 96.23.
Meanwhile, U.S. stock futures pointed to a slightly higher open. The blue-chip Dow futures gained 29 points, or 0.16%, by 9:59AM GMT, or 5:59AM ET, the S&P 500 futures rose 4 points, or 0.20%, while the tech-heavy Nasdaq 100 futures inched up 4 points, or 0.09%.