Investing.com – Though the monthly employment report continues to be one of the most watched events in the marketplace, several experts have suggested that its impact will be negligible when faced with a central bank intent on normalizing monetary policy.
The U.S. Labor Department will release its July nonfarm payrolls (NFP) report at 8:30AM ET (12:30GMT) on Friday.
The consensus forecast is that the data will show jobs growth of 183,000 this month, following an increase of 222,000 in June, with the unemployment rate forecast to dip to 4.3%, matching May’s figure as the lowest level in 16 years.
Earlier this week, the monthly report from private payroll processor ADP showed the creation of 178,000 jobs, but economists suggest that the creation of just 128,000 posts would be enough to absorb new entrants into the labor market.
Even a worse miss may do little to shake the Federal Reserve’s (Fed) resolve in its plans to remove highly accommodative policy, as the labor market is widely considered to be at full employment.
“When it comes to the U.S. jobs report, gone are the days where big swings in non-farm payrolls can make big differences to Fed policy perceptions,” ING economists.
Like many experts, ING believes markets will keep an eye on wage inflation which has remained stubbornly low as one of the few signs of slack left in the labor market.
Average hourly earnings figures are expected to rise 0.3% after gaining 0.2% a month earlier.
On an annualized basis, wage inflation is forecast to have dipped to a rise of just 2.4% from the previous 2.5%. In general terms, economists look for a number closer to 3%.
Analysts at Southbay Research suggest that market players might want to keep an eye on the lesser-followed average weekly hours.
They explained that when workers are unable to achieve a higher salary, they can increase take-home pay by working more hours.
The data held steady at 34.5 hours in June, but these experts pointed out that the number has ticked up this year after the prior advance in 2016.
Regardless, Goldman Sachs insists that their conviction that the U.S. is at full employment remains relatively high.
“We do not think the recent price and wage data imply additional slack, as the recent slowdown has come mostly in areas less indicative of labor market slack,” these analysts said.
“Thus, faced with an economy at full employment, we think the Fed is likely to follow a September balance sheet announcement with a December hike,” they concluded.
Markets remain less convinced with just 29% of market players expecting another move by December due to worries over the subdued inflation outlook, according to Investing.com’s Fed Rate Monitor Tool.
Though ING suggested the key would be watching for a jump in wages, they admitted that, “after several months of sluggishness, it's going to take a lot to make markets any more convinced about the Fed's fairly ambitious plan to hike once more this year and three times in 2018.”
They do expect a recovery in both wage growth and core inflation over the next couple of quarters.
“But that's going to take time and that means the market's skepticism is unlikely to dissipate anytime soon,” these experts explained.
At 3:47AM ET (7:47GMT), while waiting for the release, the dollar was hovering at 15-month lows against other major currencies on Friday. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, lost 0.11% to 92.60.
Gold prices held steady on Friday, as investors awaited the release of highly-anticipated U.S. employment data due later in the day, although recent data and ongoing political tensions in the U.S. continued to weigh on the greenback
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery were down steady at $1,268.66, very close to Tuesday’s seven-week highs of $1.273,30.
The blue-chip Dow futures edged forward 0.07%, S&P 500 futures inched up 0.01% while the Nasdaq 100 futures advanced 0.04%.
The yield on the 10-year Treasuries was off 0.07% at 2.226%.