2 Experts Preview Jobs Day

On Friday morning, the U.S. Bureau of Labor Statistics will release its jobs report for the month of July. The brief will include statistics on unemployment, the labor force, wages, and more. The expert consensus is that unemployment will remain steady at 5.3 percent. Estimates also project a 0.2 percent increase in wages and 215,000 newly created private nonfarm jobs. Without question, jobs day will an important landmark for the Fed in determining when to pull the trigger on an interest rate hike. With economic indicators having been generally lukewarm over recent months, hawks on the FOMC will be hoping to see signs of a robust labor market. We consulted Tara Sinclair, Chief Economist at jobs site Indeed, and JJ Kinahan, Chief Strategist at TD Ameritrade, to get their thoughts ahead of the big day. Expectations Kinahan anticipates that tomorrow's report will be more or less in line with the consensus estimates. He did, however, caution that layoffs in the military indicated by Thursday's Challenger job cuts report could warrant a slight downward adjustment in nonfarm payroll projections. Sinclair expects to at least some expansion in the labor force. "We can't continue to see 200,000 jobs created every month and not see people coming into th labor force." "[That] will probably come in some combination with increased wages," she added. As the economy approaches full employment, she believes firms will have to compete for workers and thus offer more attractive compensation. Eyes on the Fed As long as there's not a big miss in jobs growth, Kinahan and Sinclair agree that wage growth will be the key metric to watch on Friday. "Eventually, when the Fed raises rates, they're going to need an inflationary reason for it," Kinahan explained. He noted that if wages grow tomorrow, it would be the second time in three months. "I think they would be very happy with that." Sinclair said that if the labor force struggled to increase but wages shot up, it would strongly indicate that employment was near capacity and that the jobs market was healthy. But she also mentioned that not all wage growth is the same. "If it's [because of] better productivity, workers will usually get increased purchasing power….The Fed is all for that." On the other hand, she noted, wages simply driven by companies competing to draw in workers are often financed by raising prices across the board -- a situation which would leave purchasing power unchanged." Nevertheless, based on recent FOMC statements and speeches by the members of the committee, Sinclair said that "they feel like the labor market is fairly on track unless it's a big miss [on Friday]." Still, personally, she sees the mixed signals from the jobs market of late as a sign that "there's still room for residual growth."