Economy

The Fed could tighten in September, but it will be a tall order, experts say

Need 'gangbusters data' to see Fed move: Pro
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Need 'gangbusters data' to see Fed move: Pro

A Federal Reserve interest rate hike could happen in September, but only if the labor market sees a sharp bounce back this summer, said Rob Martin, senior U.S. economist at Barclays, on Thursday.

"If we see a rebound in employment, if we get 150,000 [new jobs] per month, I think that they're ready to go, and I think they go in September," Martin told CNBC's "."

The June jobs report is due Friday, with economists polled by Reuters expecting a gain of 175,000. The May jobs report handily disappointed market makers and economists, with just 38,000 jobs created, leading the market to further price out Fed tightening.

Federal Reserve Board Chairwoman Janet Yellen.
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According to the CME Group's FedWatch tool, market expectations for a rate hike are just 26.6 percent in June 2017.

"I think what's really going on with the Fed is they got slammed by the [May] employment number, just like the rest of us did," Martin said. "And it came with revisions that gave us a downward trajectory. That's the kind of signal from labor markets that signals recession, so they're very concerned about that right now."

Christopher Bennett, senior analyst at S&P Dow Jones Indices, echoed Martin's remarks.

"We would need relatively gangbusters data to see things that would sort of drive that movement one way or the other. The market has basically priced it out, in terms of a rate movement," he said in the same interview.

Friday's jobs report may also shed light into the fundamental state of the labor market, said Mike Ryan, chief investment strategist at UBS Wealth Management, in a Thursday "Squawk Box" interview.

"The last employment report we had ... was pretty crappy," he said. "The question is whether it's a one-off ... or is this the beginning of a rolling-over labor market. That's critical because the one thing that's been a solid point of this economic expansion has been job growth."