Goldman Sachs economists said they are expecting just 165,000 payrolls, based in part on the quirkiness of August reports. They said August payrolls have fallen short of consensus by about 49,000 since 2011, but were revised higher by an average 71,000 in later releases. The economists said this factor may make the Fed look past the initial report if it is weaker than expected.
"A below-consensus number may well lead the bond market to reduce its expectations for a rate hike, but it is possible that Fed officials would look through moderate weakness given 1) the strength of the June/July payroll gain, 2) their sub-100k estimate of the "breakeven" payroll gain, and 3) the well-publicized tendency for weak first prints in August," wrote the Goldman economists.
Bank of America Merrill Lynch expects to see 180,000 nonfarm payrolls, and they expect the Fed to hike rates in December.
Emanuella Enenajor, senior North America economist at BofAML, said the Fed could move sooner with the right combination of factors, and it's been concerned about labor slack.
"I think 250,000 is very strong. That would confirm that the jobs gains are continuing, but on top of that you want to see the unemployment rate fall. It would increase the sense at the Fed that a near-term hike would be warranted," said Enenajor. "We think the Fed would want to see more evidence that the economy is healing and inflation pressures are strengthening. You need a very, very strong figure to be able to say at 8:35 Friday that this is definitely enough to make them move in September."
Ward McCarthy, chief financial economist, said even if the payrolls meet his forecast of 205,000, the Fed will not hike in September.
"Janet Yellen has already told us, they don't make policy decisions based on one number. I do think they're going to get a rate hike in this year. At this point, I'm not confident it's going to be in September. Through this cycle, the Fed has done a little bit less than expected and a little bit later than expected. That's been a reliable trend, and until I'm proven wrong, I'm going to stay with that," he said.
Barclays chief U.S. economist Michael Gapen is one of the few who has stuck with a view that the Fed will hike in September. He also expects to see 200,000 nonfarm payrolls.
"We'll wait to see what happens on Friday. Things have come around to our view, and it looks like kind of less crazy than it was before. If it is a weak enough number, we'll have to kick it to December. If it's a strong number, I'll stay where I am," he said.