Market focus Friday has shifted to the latest threat from President Donald Trump to add tariffs to another $100 billion of Chinese goods. Yields were lower, and stock futures were sharply lower.
"If you think yields are going up, you really want the story to come out of this to be, everyone is on a hiring spree and wages are going up," said Aaron Kohli, fixed income strategist at BMO. "I don't think that's the narrative that will come out of this. … I think the more likely outcome is you see a muddling wage increase and a muddling improvement in unemployment."
The jump in January wages to a year-over-year pace of 2.9 percent spooked the market because hotter wages could suggest inflation and the market feared that would drive the Fed to increase the pace of interest rate hikes.
Diane Swonk, chief economist at Grant Thornton, expects 170,000 jobs but a gain in wages of 0.3 percent. Swonk said it may not show up in the data yet, but companies are suddenly giving raises to workers at all levels.
"I do think wages are going to accelerate. Timing on that is hard, but it's a pretty dramatic shift in the last month, anecdotally," said Swonk, adding she has been speaking with CEOs. "The reality is we're hitting a critical mass ... we're hitting all levels. The newest thing is not only signing bonuses. It's also raising wages and poaching."
"The tenor of these decisions has completely flipped," she said.
Swonk said the "wacky weather" may play havoc with the jobs number, and there's a risk that it could make the wage gains look even higher. It could also make the payroll number look lower. Hourly workers do not get paid if they miss work from storms, but salaried workers would still receive a check, and their wage increases could have been greater.
"The problem is we also have this weird weather influence," she said.
Mark Cabana, head of U.S. short rate strategy at Bank of America Merrill Lynch, said the weather could be a factor but there also could be some giveback because of the strong hiring in February.
"We're at 195,000 payrolls and 0.3 percent wage growth," he said. "We expect we could see a further increase in labor force participation, which would certainly be encouraging to the Fed."
Markets may have a chance to hear what Fed Chairman Jerome Powell thinks about the report when he speaks in Chicago at 1:30 p.m., and also about the possible impact from the trade tensions with China.
Cabana said the market reaction could be a little stronger to the Fed chair than to the jobs report. "Given our expectations, the risk is the Fed chair can sound a little bit more hawkish," he said.
Swonk said Powell will try to sound balanced, and he may discuss transparency, including the potential for a Fed press briefing after every meeting.