Markets will be looking for signs of cracking in Friday’s jobs report

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Investors and the Federal Reserve will get another glimpse into how strong the labor market is on Friday when the Department of Labor releases July’s “employment situation” report at 8:30 AM ET.

Economists expect nonfarm payrolls to expand by 230K jobs in July, down from the 372K reported in June. The three-month average fell to 375K in June from 383K in the previous month.

The unemployment rate is expected to stay at 3.6%, near its all-time low.

If the July numbers are soft, “I think the markets will cheer it,” as that could be viewed as reason for the Fed to pause its tightening, Sumit Handa, managing director at investment firm Pennington Partners, told Seeking Alpha.

Indeed, the job openings and labor turnover report for June showed a decline in the number of job openings — from 11.30M in May to 10.70M in June. And the four-week moving average for initial jobless claims has edged up to 254,750 the week ended July 30 from 248,750 in the previous week.

“I think we’re starting to see cracks in the labor market. It started with a number of the technology companies from Google (GOOG) to Tesla (TSLA) to Microsoft (MSFT) to even Apple (AAPL),” freezing hiring and even layoffs, Handa said. In addition, companies that originate and refinance mortgages have been cutting jobs as higher interest rates constrain demand. By contrast, hiring in leisure and hospitality sector should remain strong as travel rebounds from the pandemic.

With inflation a chief concern, consumers and the Federal Reserve will be on the watch for what’s happening with wage growth. Average hourly earnings, which stood at $32.08 in June, are expected to rise 0.3%, about the same increase as in June. So far, Fed officials say they’re not seeing signs of the dreaded wage-price spiral.

Previously (Aug. 3) Inflation fight: Fed officials remain adamant about restrictive policy

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