Friday's non-farm payrolls data will be the last before the Fed's September policy meeting and a positive figure could push policy makers to embark on a rate hiking cycle.
A Reuters survey of economists forecast U.S. nonfarm payrolls increased by 223,000 last month, matching June's job gains, a number which would be slightly above the monthly average for the first half of the year.
The Fed last month upgraded its assessment of the labor market, describing it as continuing to "improve, with solid job gains and declining unemployment."
There is, however, a lot of uncertainty surrounding July's payrolls forecast after data vendor ADP this week reported a sharp slowdown in private sector hiring last month.
Average hourly earnings are expected to have increased 0.2 percent last month, but leaving them well below the 3.5 percent growth rate economists associate with full employment.
The unemployment rate is forecast to hold steady at a seven-year low of 5.3 percent, near the 5.0 percent to 5.2 percent range most Fed officials think is consistent with a steady but low level of inflation.
A good employment report would add to robust July automobile sales and service industries data by suggesting the economy continues to gather momentum after growing at a 2.3 percent annual rate in the second quarter. Employment gains in July are expected to have been concentrated in service industries.
"We continue to see signs that the U.S. economy is slowly, but surely gaining traction," said Bryan Jordan, deputy chief economist at Nationwide in Columbus, Ohio.
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