The May jobs report will dominate the investment landscape next week, offering possible insight into when the Federal Reserve may start tightening monetary policy and shutting off the stimulus spigot.
The U.S. Labor Department will release the employment figures on Friday morning.
Jobs reports through the first half of 2013 have been generally positive, averaging about 200,000 jobs created per month. But the path has been choppy as evidenced by the March report that revealed just 88,000 new jobs added to the economy, a figure that was later revised upward.
The unemployment rate currently stands at 7.5%, a four-year low.
A solid May report could prompt more chatter from Federal Reserve Board members that it’s time to taper off the Fed’s $85 billion in bond purchases each month.
The debate over when and how to start scaling back that program, called quantitative easing, has pitched back and forth with each new jobs report. When the report is positive, some Fed board members who oppose the stimulus argue it’s time to cut back on QE III. When the report is less robust, other Fed board members who support the program use the data to justify maintaining the bond purchases at their current level.
Many analysts believe QE III has acted as an artificial stimulant for the recent stock market surge and that when the Fed cuts off the program it will mean the end of the current bull market.
Payroll firm ADP will release its own jobs report on Wednesday. The report usually gives a decent forecast of what the government report will say later in the week.
Also due next week are two manufacturing indexes on Monday, as well as a data on construction spending. Motor vehicle sales are due Tuesday and they’re expected to be strong in the wake of recent consumer sentiment surveys that show consumer optimism at a six-year high.