This is the number that could get the Fed to hike rates in September

If August job growth comes in somewhere over 200,000, that would be strong enough to boost the chances for a Fed interest rate hike in September.

Economists are forecasting 180,000 nonfarm payrolls were created in August, and the unemployment rate is expected to fall by a tenth to 4.8 percent, when reported Friday morning, according to Thomson Reuters. The report follows July's 255,000 jobs, and comes after two robust months of hiring removed concerns about an especially weak labor market in May.

The Fed put the spotlight on this one number, when officials specifically said last week that September is possible for a rate hike depending on the data. The employment report is the most important data input for the Fed. Even so, many Fed watchers remain convinced that the second rate hike in 10 years is more likely to come in December, after the election and much more data.

Fiat Chrysler Auto assembly workers leave the Fiat Chrysler Warren Truck Assembly plant during a work shift change in Warren, Michigan.
Rebecca Cook | Reuters
Fiat Chrysler Auto assembly workers leave the Fiat Chrysler Warren Truck Assembly plant during a work shift change in Warren, Michigan.

But for the markets, the Fed turned up the heat and traders pushed the odds in the futures market to about 40 percent for a September rate hike. However, a very weak August ISM manufacturing report knocked the odds back to one-in-three Thursday morning. There is no consensus on what jobs number would move the Fed, but a number of strategists and economists point to a starting threshold of 200,000.

"We were talking about it here, whether it's 200,000, 225,000 or 250,000," said John Briggs, head of strategy at RBS.

David Lutz of JonesTrading wrote in a note that bloggers are talking about a "200k-300k range. That's yer 'Whisper' high."

While traders are speculating about a jobs number that beats forecasts, economists are warning that in recent years, the August jobs number has had a history of missing forecasts by a wide margin. Lutz also said he believes a number of 225,000 would move market expectations toward a September hike.

Diane Swonk, CEO of DS Economics, said the Fed will need to see a very strong jobs report, but also decent signs that the consumer is spending and steady or improved inflation before considering September seriously. "Probably 200,000 would be a slam dunk," she said. "August is a volatile month. We've got retail sales and we've got CPI and PPI yet to go." Swonk does not expect a September rate hike and said she expects just 165,000 payrolls, given the seasonality affecting August reports that have missed forecasts and then been followed by sharp upward revisions.

"If we get a strong number above 200,000, I would say the odds would go up. If we get a number much below ... 150,000, I would say the odds fall much further. I would expect the dollar to go in the direction of the odds," said Marc Chandler, chief currency strategist at Brown Brothers Harriman. Chandler said the ISM manufacturing data, which drove the dollar and Treasury yields lower, will not be a factor for the Fed since it represents a small part of the economy.

"It's possible we'll get a sell-off in the Treasury market if the number beats by a lot," said Boris Rjavinski, director of rate strategy at Wells Fargo Securities. "If it misses by 10,000 or 20,000, the market will probably shrug it off. If it misses by 100,000, that's a different story. For August payrolls, the initial number tends to come in under what's ultimately reported, with revisions. I would say if the number is weak, some of the reaction will probably be tempered by the fact that we've seen this happen before in August."

Regardless of the number, there could be volatility since views are so varied. There is also a broad range of forecasts for the jobs number, from 255,000 from Societe Generale to 125,000 from PNC.

Mark Zandi, chief economist at Moody's Analytics, said a number of things would have to line up for the Fed to move in September, but one key would be the market's reaction. "If the jobs number is enough to have markets attach a more than 50 percent probability, that would be enough to get them to move," said Zandi.

Zandi expects 150,000 jobs for August, in part due to a seasonal drag that has affected August employment reports. "Subtracting from these technical issues, I think job growth is somewhere between 175,000 and 200,000," he said. ADP payroll data showed 177,000 jobs for August. Economists in general have been expecting job growth to slow from the recent 200,000-plus pace, as the economy is getting closer to full employment.

"I think you need something like 200,000 and a 4.8 percent unemployment rate. I think if you got those numbers, that could be enough to convince enough people to move," he said. Economists also expect to see an increase of 0.2 percent in average hourly wages.

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.