All Eyes On August Jobs Report As Fed Continues Inflation Fight

The Nonfarm Payrolls report for August is due to be released at 8:30 a.m. Friday. The Street expects month-over-month job growth of 293,000 for August, which is on top of a huge 528,000 increase in July.

The August jobs number is significant as the U.S. economy is dealing with the hottest inflation seen in 40 years.

The report will be closely watched, as it could shift Federal Reserve officials' sentiment ahead of the upcoming policy meeting in mid-September. 

Average economist estimates are calling for the unemployment rate to remain unchanged at 3.5%.

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

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%.

A strong August jobs report could prompt the Fed to hike interest rates by another 0.75%. On the other hand, weaker-than-expected job growth could soften the Feds' hawkish stance, which could impact the rate hike in September.

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.

A higher interest rate is generally considered negative for stocks as a company's borrowing costs rise and vice-versa. The August jobs report could be a classic case of "good news for the economy can be bad news for stocks."