Slowing labor market puts stocks on edge

Stocks are closely watching job report, but it may not react as you’d expect. A job report showing a gradual slowing of the labor market could actually be seen as a positive sign by investors.

Wall Street is anxiously observing Friday’s nonfarm payrolls report. Economists surveyed by Dow Jones are predicting the U.S. economy added 75,000 jobs last month, a modest increase from the previous month's weak numbers.

The unemployment rate is also expected to rise slightly from 4.2% to 4.3%.

Investors may overlook a weak jobs report if the key number falls within a sweet spot of 70,000 to 95,000 new jobs.

According to Adam Crisafulli of Vital Knowledge, a number in this range would be cool enough to support a Federal Reserve interest rate cut, but not so weak as to raise concerns about recession fears.

This week's stock market report could put pressure on the stock market according to Luke Tilley, chief economist at Wilmington Trust.

The stock market is likely to react negatively if the jobs report falls outside the expected range.

An economist who forecasts an increase of 75,000 jobs for August said that he expects a negative job number will occur in the second half of the year, potentially as soon as this Friday.

KKM Financial investment chief Jeff Kilburg is concerned that Friday’s job report could be stronger than expected. He believes that the report could boost interest rates and reduce the chances of the three rate cuts that many traders are hoping for by the end of the year.

The ADP private employment report, which can sometimes be a precursor to the official job's figures, was weaker than expected, showing the addition of just 54,000 private payrolls last month.

Despite the low number, the report fell within a comfortable range for markets and the stock market gained on Thursday following the figures.