Coverage: Jobs report watched for Fed clues

The U.S. Department of Labor will release this morning details of the job market in May, and many investors will be looking at the numbers for clues as to whether the Federal Reserve will raise interest rates this summer.

Adam Shell of USA Today had the day’s news:

The big question is whether the economy created enough jobs in May to give the Fed the courage to pull the trigger on its first rate hike of 2016 at its June meeting. Fed chair Janet Yellen recently put a June hike back on the table, saying it’s “appropriate” to increase borrowing costs “in coming months” if jobs and the economy continue to improve.

Due to a drag from the Verizon strike, economists are forecasting 160,000 new jobs in May, unchanged from April, which at the time was viewed as a weak number as expectations were for 200,000 new jobs.

“I think the Fed is looking for strong data to provide them with the cover to hike,” says Anderson.

What would make a June rate increase more defensible, he adds, is if the May report is strong and the weak April report is revised upwards. “That could be enough to do the trick,” he says.

Hideyuki Sano of Reuters examined how projections have been affecting markets:

Markets expect U.S. employment data due at 1230 GMT to show a non-farm payroll increase of about 164,000 and 0.2 percent rise in average wage earnings in May.

The data will be followed by a speech from Federal Reserve Chair Janet Yellen on Monday, the last chance for the Fed to communicate with markets before it begins a blackout period ahead of its policy meeting on June 14-15.

“If we see a job figure that is largely in line with market consensus and if Yellen maintains a positive tone on rate hikes, I think the chances of a rate hike in June is pretty high,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

Currently U.S. money market futures are pricing in only about 20 percent chance of a hike in June and 60 percent by July.

Victoria Craig of Fox Business reports that the numbers are unlikely to dissuade the Fed from raising rates:

What’s up for debate is which summer month the U.S. central bank will move rates higher.

On Friday morning, the Labor Department is set to report figures showing the health of the job market during the last month. Economists polled by Thomson Reuters expect to see a gain of 164,000 jobs in May with the unemployment rate ticking down to 4.9% from 5% in April.

The Federal Open Market Committee convenes for two-day policy-setting meetings on June 14 and 15 and again on July 26 and 27. Fed funds futures, a tool used to predict market expectations for changes in U.S. monetary policy, show a 21% chance of a rate hike at the conclusion of this month’s meeting, while the odds jump to 58% for at least one rate rise by July.

Fed officials, including Chairwoman Janet Yellen, have, in recent weeks, reiterated their insistence that any decision to tighten monetary policy would depend on incoming economic data. The latest figures show a mixed picture for the U.S. economy.