There is also the 10 a.m. release of ISM nonmanufacturing data, which will give a read on services sector activity and also a look at jobs in the sector. The ISM manufacturing survey earlier in the week showed the employment index slipped into contraction territory, to 48.7 percent from 50.1 percent in May, and manufacturing is one area in the jobs report where economists expect softness. There is also international trade data at 8:30 a.m.
The data also comes in a holiday-shortened week that is thin on traders, light on volume and impacted by anxiety about the Fed and jobs data, not to mention a number of other cross currents. For instance, worries that Portugal's coalition government is unraveling and concern about the Greek bailout weighed on the euro. An unstable political situation and massive protests in Egypt, and protests disrupting Libya's oil sector drove up oil prices, with WTI crude hitting $100 for the first time in 14 months.
The dollar rose, and investors dumped emerging market assets amid expectations the Fed will move to slow its easing program. Brazil's stock market plunged four percent to its lowest level in more than four years, after weak industrial output data sparked more fears of economic slowdown.
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But the Friday jobs report looms large, since employment data is viewed as a trigger for the Fed's decision-making on whether the economy will be strong enough for it to cut back on its quantitative easing, or its bond purchasing program.
"Certainly my forecast is for more of the same. I've got 160,000 (jobs). There's some talk around about the fact that June numbers tend to undershoot relative to expectations," said Stephen Stanley, chief economist at Pierpont Securities. "That's a fair point, but I would also point out that in some of those instances, the numbers had already slowed down in prior months…We've had some big slowdowns in past years in the spring in payroll growth, but we haven't seen it this time."
Credit Suisse economists Jonathan Basile said he expects to see 150,000 jobs Friday, and he also has been looking at the pattern of weakness in June. "There seems to be a pattern where there's been downside surprises for 10 of the last 13 years," he said. "We haven't had a materially upside surprise since 1999. 150,000 isn't significantly different than where we were two months ago. it's where the short-term trend is. It reinforces the downshift from the beginning of the year. To us, it's another solid month, but it isn't something that gets markets really in a tizzy about imminent tapering."
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The June jobs report is being watched as an important metric for the Fed, which has said it could taper back its bond purchasing program if the data improves enough. It currently is buying $85 billion a month in Treasurys and mortgages.
The Fed, after its last meeting, said it could begin pulling back on bond purchases by the end of the year if the data is strong enough and finish the purchases by the middle of next year. That sent rates shooting higher, stocks reeling and the dollar higher. Rates have stabilized as multiple Fed officials, in an unusually uniform commentary, assured markets that the Fed has no intention to raise short term rates and that its decision on the quantitative easing program will be made on the strength of the economic data.