What Friday's jobs report could mean for investors
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Wall Street's expectations for Friday's jobs report vary widely, setting up what could be a potentially volatile market reaction. Economists polled by Dow Jones predict the headline number will show nonfarm payrolls expanded by 83,000 in July. The unemployment rate is slated to hold steady at 4.2%. Bank of America anticipates the payroll growth figure to come in slightly lower, at 80,000. Vanguard, on the other hand, says to anticipate a gain of just 18,000. The latest update from the Bureau of Labor Statistics comes amid conflicting signals about the health of the labor market. With a range of expectations, some investors are surely in for a surprise. Unemployment rate Federal Reserve policymakers who set official interest rates tend to focus more on the unemployment rate. If that stays unchanged, investors may not make major moves after the 8:30 a.m. release, believing it won't change their outlook for fed funds, which currently stand at 3.50% to 3.75%. But Bank of America economist Aditya Bhave said the jobless rate could tick up to 4.3% as the labor force participation rate — all those who are employed or are looking for a job — rises. Or, Bhave said that strong household employment could lead it to remain at 4.2%. Bhave cited potential summer distortions and a slowdown in local government hiring as reasons Friday's report may come in soft. If the report comes in as Bank of America expects, however, Bhave said that it would show labor market risks have been mitigated. If that's the case and the labor market sounds the all clear, the Fed could raise interest rates as many as three times this year to fight off inflation, Bhave said. Fed funds futures suggest that the central bank will only hike borrowing costs once in the remainder of 2026, according to the CME's FedWatch tool. Economists at Vanguard also anticipate the unemployment rate may have inched up to 4.3% in July. By the end of the year, the asset manager forecasts joblessness could reach 4.6% of the labor force. Specifically, the labor market could be in for a pullback after a round of hiring in the spring tied to the World Cup and government staffing, Vanguard said. Any weakness could worsen in the fall, given recent challenges in entry-level hiring and as new graduates flood the workforce, the money manager said. Crosscurrents In the runup to Friday's report, recent data has offered varied views on where the job market stands. Jobless claims for the week ended Aug. 1 came in at 199,000 , below the consensus expectation of 204,000, according to the Labor Department. At one point in July the weekly number fell to its lowest level since 1969. But ADP reported Wednesday that private companies added 44,000 jobs in July , missing the consensus estimate on Wall Street for 75,000. And on Tuesday, the BLS said that job openings were little changed in June. Despite the weak ADP reading, Yardeni Research said on Wednesday that the three-month average for private payroll growth sits at 87,000 — a rate that the firm said will keep unemployment down.