The U.S economy is expected to have added 223,000 nonfarm payrolls in July, enough to allow the Fed to pull the trigger on its first rate hike in nine years.
The Fed will consider a possible first rate hike at its Sept. 16 and 17 meeting, but economists say that even with a strong report, it is far from clear cut when the Fed will move off of the zero fed funds target rate it has had in place since late 2008.
There are a number of variables, including that data between now and then must show continued employment strength, an economy that continues to grow and signs that inflation could pick up. Even if those conditions are in place, negative international developments, in the form of a possible financial shock, could slow the Fed’s hand.
Economists mostly expect the Fed to tighten in September but market expectations flip-flop between September and December, shifting odds based on each piece of data or Fed comment. For instance, the market gave slight credence to this week’s weaker-than-expected ADP report, showing payroll growth of 185,000, but gave high credibility to a jump in the employment component of the ISM Nonmanufacturing survey to a 10-year high.
The July monthly payroll data will be released at 8:30 a.m. ET Friday, and economists forecast an unchanged unemployment rate of 5.3 percent and average hourly wages growth of 0.2 percent. That compares to June’s job growth of the same 223,000 and flat wage growth.