What to expect from the U.S. jobs report - NFP today at 15:30 GMT+3

Friday will mark the release of the May jobs report at 8:30 a.m. ET, which will be the biggest economic data report of the week.

Economists expect nonfarm payrolls grew by 180,000 in May while the unemployment rate should stay steady at 4.4%.

Average hourly earnings are expected to rise 0.2% over the prior month and 2.6% over the prior year. Also closely watched will be the labor force participation rate as well as the broader underemployment rate — which includes those working part-time but would prefer to work full-time — which sat at a post-crisis low 8.6% in April.

On Thursday, we got the first two labor market data points of the week, with the highlight coming from research institute ADP. Private payrolls in the US. grew by 253,000 according to ADP's number, marking the sixth time in seven months more than 200,000 jobs were added.

As payrolls continue to climb, however, many employers are facing a shortage of available labor, as we saw in the Federal Reserve's latest Beige Book report this week. The key to unlocking America’s tight labor market could be hiring convicted felons, who are often disqualified from getting certain jobs.

And also on Thursday the Institute for Supply Management released its latest manufacturing activity report, which showed labor in short supply across industries.

What Wall Street is looking for on Friday

“We expect headline payrolls to increase by 175,000, in line with its recent average,” write economists at Barclays. “We expect most of the increase to come from the private sector.

“Payrolls surprised to the downside in March due, in our view, to warm weather early in the year that may have pulled some hiring forward into January and February, and adverse weather in some regions of the country in March. The rebound in April employment suggests these factors have largely played out and, alongside claims data that show some improvement in the separation side of the market, we look for another month of solid employment growth.”

At Deutsche Bank, economists are looking for a gain of 235,000 jobs in April, more than consensus estimates. The firm notes that during the reference week for the May report, the four-week moving average for jobless claims was at its lowest for any survey week since July 1973.

“Jobless claims are one of the best real time indicators of the health of the labor market and highly correlated with overall economic activity,” writes chief U.S. economist Joe LaVorgna.

“Two, withheld income tax receipts are tracking up close to 7% compared to a year ago, which points to rising income growth. Since tax receipts are a direct function of employment, hours and wages, the recent acceleration in income growth should at least partly be reflected in the pace of job gains. We are less confident in wages, whose growth rate remains soft relative to the sub-5% level of the unemployment rate.”

Ian Shepherdson, an economist at Pantheon Macro, also sees potential downside risks to hourly earnings, a metric closely-watched for signs of inflation and a key measure for the Fed, given that the survey week for the report — which includes the 12th of the month — was different than the week containing the 15th of the month.

Shepherdson notes that this calendar quirk in May could push year-on-year earnings increases to 2.4% in May, which would be the lowest since February 2016, but expects wages would rebound in June.

Source: Bloomberg Pro Terminal

Senan Fuchedzhiev - Trader

Read more:

• And for all the bounty hunters: Iran offers $80m for the head of Donald Trump
• US service member and 2 US Defense Dept contractors killed in Kenya attack
• Iranian Quds leader Qasem Soleimani has been killed – how are markets reacting
• A calm end of an otherwise loud 2019
• Old but Gold – Top 5 posts of Varchev Finance