Friday's Jobs Report Could Rock Your Portfolio: If It's Bad, It Might Just Be Good

This week's U.S. jobs report could be a signal for what's to come from the Federal Reserve later this month. 

What To Know: The U.S. jobs report, which is due at 8:30 a.m. Friday morning, will be closely watched, as it has the potential to shift the sentiment of Fed officials ahead of the upcoming policy meeting in mid-September. 

Economists are expecting a gain of 298,000 in August payrolls, according to Bloomberg report. Average economist estimates are calling for the unemployment rate to remain unchanged at 3.5%. Forecasts are also calling for a solid August wage growth figure. 

The Federal Reserve is paying close attention to the jobs market as the central bank aims to cool the hottest inflation numbers in more than 40 years.

The Fed hiked interest rates by 75 basis points for the second consecutive month in July, bringing its target fed funds rate up to a range of 2.25% to 2.5%.

Why It Matters: Friday's jobs report could be enough to push Fed officials toward another 0.75% rate hike following impressive July employment numbers, improving consumer sentiment and a surprise jump in job openings. 

"In the context of all those data, this report becomes very important," said Anna Wong, chief U.S. economist at Bloomberg Economics.

Wong noted the report could help to confirm the aforementioned recent indicators, pointing toward a very resilient economy. If this is the case, Fed officials will likely lean toward a 0.75% hike this month. 

Softer employment growth numbers in Friday's report have the potential to shift expectations to a less aggressive 0.5% rate hike. 

According to several reports citing payroll processing company ADP, private payrolls increased by just 132,000 in August, down sharply from a 268,000 gain in July. The number also came in well below average estimates of 300,000.

"Our data suggests a shift toward a more conservative pace of hiring, possibly as companies try to decipher the economy’s conflicting signals," Nela Richardson, chief economist of ADP, said in a statement.

"We could be at an inflection point, from super-charged job gains to something more normal."

SPY Price Action: The SPDR S&P 500 SPY was down 0.04% at $395.01 Thursday afternoon. 

Photo: Amtec Photos from Flickr.