All Eyes Are On Friday's Jobs Report: Data Is Critical For Fed's Next Move In Brawl With Sticky Inflation

Thursday's jobs data suggests the labor market might finally be starting to roll over, but attention is shifting to Friday's non-farm payrolls report, which Fed Chair Jerome Powell flagged this week as key to understanding the central bank's next move. 

What Happened: Jobless claims increased by 21,000 for the week ending March 4 to 211,000 from an unrevised level of 190,000 in the prior week, according to data the Labor Department released on Thursday.

The SPDR S&P 500 SPY initially climbed higher as the number came in above average economist estimates of 195,000, a sign that Fed policy might be starting to impact what has been a relentlessly strong labor market. But all the attention has shifted to Friday's jobs number.

Related Link: New Unemployment Claims Grow As Tech Layoffs Escalate, Fed Tries To Cool Economy

Why It Matters: The surprise jump comes in the wake of Powell's testimony to Congress this week in which he highlighted the importance of incoming data, including Friday's jobs number.

"A jobs report on Friday and a CPI and PPI inflation report next week ... those will be important and we'll scrutinize them," Powell said in an early exchange with lawmakers in Washington, D.C. on Wednesday.

Today's hotter-than-expected jobs number suggests the non-farm payroll report might be due to cool off from last month. A lower number could push back against market expectations for a more aggressive Fed response. 

Before the Fed issued its semiannual Monetary Policy Report this week, the market was projecting about a 40% chance of a 0.5% hike at the Fed's next meeting later this month. Following Powell's testimony, projections rose significantly and are sitting around 77%, according to CME Group data.

Check This Out: The Fed's Next Move Against Inflation Hinges On Incoming Data: Powell Plans To 'Scrutinize' All-Important CPI, PPI, Jobs Numbers

What To Expect Friday: The Bureau of Labor Statistics is set to release the February nonfarm payroll data at 8:30 a.m. ET Friday.

Economists are expecting employers to have added 205,000 payrolls last month after the U.S. added 517,000 jobs in January, which came in well above average estimates of 187,000. A cooler-than-expected report could help to confirm Thursday's hotter-than-expected jobless claims number.

SPY Price Action: The SPY was down 1.01% at $394.88 Thursday afternoon, according to Benzinga Pro.

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