The report that could be huge for the market next week

The Bureau of Labor Statistics is set to publish its monthly employment situation next week. S&P Global portfolio manager Erin Gibbs is watching for one critical portion: wage growth.

"I'm looking for the unemployment rate to remain relatively stable, around 4.3 percent. What I'm really looking for is the wage growth. That's where we want to see some inflation and some healthy growth within the U.S. consumer," Gibbs said Friday on CNBC's "Trading Nation."

Economists are collectively expecting hourly earnings to rise by 2.6 percent year over year, and for the unemployment rate to remain unchanged at 4.3 percent, according to FactSet data. Last month's report reflected falling unemployment, though a nonfarm payrolls figure and wage growth figure missed economists' expectations.

To Gibbs, the "real concern" in the prior report was average hourly wage growth.

"Higher wage growth would mean that consumers have more money to spend; this is where we could really see an impact in the consumer discretionary sector. It's been particularly hard hit for the first half of the year. We could finally see some growth, particularly in those retail stocks, for the second half," Gibbs said.

Though the S&P 500 consumer discretionary sector has advanced a little more than 10 percent year to date as the third-best sector, retail stocks in the space fell in the first half of the year as brick-and-mortar retail names have faced headwinds. A popular retail-tracking exchange-traded fund, the XRT, has fallen nearly 8 percent this year.

Despite a relatively healthy economic backdrop, wage growth hasn't advanced at the same clip, Bank of America Merrill Lynch economists wrote Friday in a note to clients.

"Wage growth moved sideways in the first half of the year despite a faster than expected drop in the unemployment rate. But further job gains and reduction in slack in 2H should gradually bid wages higher," the authors, led by chief U.S. economist Michelle Meyer, wrote.

Meyer expects average hourly earnings to grow by 0.3 percent month over month, pushing the year-over-year comparison up to 2.6 percent (from 2.5 percent).

In a mid-May note entitled, "What's up with wages?" Meyer wrote that as of the latest data, "wage growth in the retail trade and mining and logging sectors have lagged behind, while information, leisure and hospitality, nondurable goods manufacturing, and professional and business service sectors have experience above-average wage growth."


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

Read more