The jobs report is Friday and economic reports don’t get much more important than this one

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  • Economists expect to see 180,000 jobs added in May, but a much larger or smaller payrolls number could help determine when the Fed will move on interest rate cuts.
  • Wall Street economists have shifted their view of the Fed, and now expect it to cut interest rates twice this year, with the first in September.
  • But a weaker number could make the Fed move sooner, and if the number is strong, the market’s expectations for a rate cut could be pushed back.

The economy was expected to have added a solid 180,000 jobs in May, but if the payroll number is much stronger or weaker than forecast, that could be a game changer for the markets and any consumers or businesses looking for a loan.

Coming amid a huge shift in expectations for Federal Reserve interest rate cuts, economists say a big miss either way in Friday morning’s May employment report could have a profound impact on markets and help decide the timing of the first Fed interest rate cut in more than 10 years.

“There’s clearly been a shift in Fed rhetoric,” said Joseph LaVorgna, chief U.S. economist Americas at Natixis. He said Fed Vice Chair Richard Clarida helped first stir the speculation that the Fed would lower rates when he discussed several weeks ago how the fact the central bank in the past had cut rates pre-emptively, or made an ‘insurance’ cut.

Other Fed officials, like St. Louis Fed President James Bullard, also made dovish comments about cutting rates. Then Fed Chair Jerome Powell told a Fed conference in Chicago this week that trade is having an uncertain affect on the economy, and the Fed “will act as appropriate to sustain the expansion.”

“What’s interesting about the employment report is it raises the chance that the Fed could move,” said LaVorgna.

The May jobs report follows April’s surprisingly robust 263,000 payrolls, but other data, like retail sales and manufacturing data have been sending mixed messages. Economists also expect hourly wages rose by 0.3% in May and unemployment was unchanged at 3.6%, according to Dow Jones.


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