GET READY: Here's your complete preview of the upcoming jobs report
Reuters/Lucy Nicholson
Jobs Day caps the short work week on Friday.
At 8:30 a.m. ET, the Labor Department will release details of America's employment situation in May.
Via Bloomberg, here's what Wall Street is expecting:
- Nonfarm payrolls:+160,000
- Unemployment rate: 4.9%
- Average hourly earnings month-on-month: +0.2%
- Average hourly earnings year-on-year: +2.5%
- Average weekly hours worked: 34.5
This is the last jobs report before the Federal Reserve's policy meeting from June 14-15, and so it will be examined very closely.
Several FOMC members have said quite clearly that the economic data are convincing them to raise interest rates soon.
The minutes from the committee's last meeting in April said they could raise rates in June. And last Friday, Fed chair Janet Yellen said a rate hike in the coming months is appropriate.
What matters most to the Fed is whether the economy is close to full employment, and whether labor-force participation will reduce the unemployment rate to as low as 4.5%, said David Blitzer, chairman of the index committee at S&P Dow Jones Indices.
"Depending on how one answers that question, you really get the answer to whether the Fed is serious about raising interest rates possibly as soon as June, or [whether they are] going to sit on the sidelines and watch," he told Business Insider in a recent interview.
"If we're pretty close to full employment, there's not much slack in the economy, and they'll probably respond" by raising rates, he said.
Verizon
We could see a big drop in the headline number of job gains, and it probably won't be anything to be alarmed about.
That's because there's an expected one-time hit from the 35,100 Verizon workers who were on strike during the reference period for the establishment survey in May. Workers had left the job after talks on planned benefit cuts faltered. Unions announced an agreement with the company on Monday.
Wells Fargo chief economist John Silvia estimates that payrolls grew by 125,000, the third lowest estimate on the Street according to Bloomberg, which reflects the Verizon effect.
Silvia also sees manufacturing and construction payrolls slipping along with telecommunications jobs.
But "looking past May’s strike-depressed performance, the US labor market continues to firm — consistent with Fed officials’ assessment in the April FOMC meeting minutes," Silvia wrote in a note.
The other thing to remember is that with an economy approaching full employment, it's natural for the pace of job gains to slow since the number of active job seekers falls as people successfully find work.
This could mean higher wages for workers — a pickup that would be welcome after sluggish average earnings increases in recent years. The Fed's Beige Book prepared for its upcoming meeting showed that most of its districts reported wage pressures amid a tightening labor market.
