Hiring was expected to have continued at a strong pace in April, even as the economy grows at a sluggish pace.
The April employment report is expected at 8:30 a.m. EDT Friday, and according to Thomson Reuters, economists forecast 202,000 jobs were added in the month. The unemployment rate was expected to be unchanged at 5 percent, while average hourly wages were expected to have grown by 0.3 percent.
"We think it's going to be 190,000 or a little south. We think the days of 200,000 plus cannot be sustained," said William Lee, head of North America Economics at Citigroup. Lee said it is increasingly difficult to reconcile weak economic growth with solid job growth, and job growth could start to slow.
Some economists expect the pace of jobs growth to begin to slow in coming months, both because the economy is slow and also because it is moving toward full employment.
Goldman Sachs economists in a note Thursday said they expect the labor market to return to full employment by the end of the year. They raised their forecast for April jobs to 240,000 Thursday, based on gains in the ISM nonmanufacturing survey jobs component. But others fear Wednesday's ADP report of just 156,000 jobs, while not an accurate predictor of jobs growth, might be more realistic.
"I would say the data this week suggests the risks are a bit skewed to the downside. ADP came in weaker than expected. Claims inched higher," said Michelle Meyer, Bank of America/Merrill Lynch deputy head of economics. She expects 200,000 jobs were added and the unemployment rate remained unchanged at 5 percent. She said it will be important whether the participation rate continues to rise, a sign the economy can continue to add jobs at a good pace.
But she and others are wary of sluggish growth. For the first quarter, growth is tracking at about 0.7 percent, and according to the CNBC/Moody's Analytics Rapid Update, economists see an average 2.1 percent growth in the second quarter.
Jobs growth has been an important factor for the Fed, and it has remained robust. Meyer expects the Fed to hike rates in June, and then again in December. But the market has priced out rate hikes, and some economists believe the Fed's forecasts for two rate hikes this year have been too ambitious.
"The uncertainty facing our economy right now is heightened by political events this summer both at home and abroad, and what we don't know is how the markets react to that uncertainty," said Lee. "The Fed is trying to breathe life into dead meetings." Lee was referencing the fact that the Fed has said it is data-dependent and described every meeting as potentially being "live," meaning it could hike rates. But many economists have written off June because of the uncertainty around the U.K. vote on whether to remain in the European Union.
"The data's important, but we have another month of payroll jobs to go before June 15 [the Fed meeting]," said Rupkey. "[The jobs number's] not as critical as it would be ordinarily. It could take a rate hike off of the table if it's 150,000." Rupkey expects to see 220,000 jobs, a stronger than average forecast because the jobless claims in the week of the April employment survey were the lowest since 1973.
But he does expect the hiring pace to slow down in coming months. "At some point we're going to run at 170,000 every month, and not 200,000. It will slow a bit and maybe the next rate will be 150,000. The population isn't growing and [almost] everyone who lost their job in the recession has found work," Rupkey said.
Besides jobs data, consumer credit is reported at 3 p.m. There are a few earnings from Arcelor Mittal, Madison Square Garden, Exelon, Weyerhaeuser and Gogo. Berkshire Hathaway reports after the closing bell.