Will jobs data outweigh China fears?

September 07 01:04 2015

Wall Street’s version of the under and over, for Friday’s jobs number: economists are expecting roughly 218,000 new jobs created last month and unemployment to inch down to 5.2% from 5.3%. What’s got Wall Street analysts so pumped up for the big August jobs report? Two words: The Fed.635594119943931322-AP-FINANCIAL-MARKETS-WALL-STREET-70748234 (1)

If jobs come in super strong it could boost the odds of a Fed interest rate hike when the central bank meets again on Sept. 16-17. Low rates, of course, have helped power stocks higher the past six years. The expectation is for the economy to again pump out more than 200,000 new jobs, and send yet another message that U.S. job growth is healthy. And the Fed is on record saying they’re waiting for more improvement in employment before hiking rates.

But here’s the rub: even though U.S. data, ranging from employment to auto sales to productivity to the services part of the economy, are coming in strong and point to the first hike since 2006, there’s a big elephant out there. China. Beijing’s weakening economy and wobbly stock market and what it means for market stability is a wildcard. A strong jobs report will make the Fed’s decision on rates that much tougher.

“This is a very tough call for the Fed,” Michael Farr, president of money-management firm Farr, Miller & Washington, said. “For my part, I think there are several reasons why the Fed will either defer the first rate hike or do one symbolic hike and then pause.” His reasons for a cautious Fed include recent instability in global markets, the negative impact a rate hike will have on economies in emerging markets as well as lingering concerns about the underlying strength of the labor market, despite the sharp decline in the unemployment rate.

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