America’s job market could be in for a surprise Friday.
The Labor Department publishes the May jobs report at 8:30 a.m. ET Friday. Economists surveyed by CNNMoney forecast that the U.S. economy added 159,000 jobs in May. In April, there were 160,000 new jobs added.
The April number was lower than expectations and some experts believe the Verizon strike had a direct impact on May’s payroll numbers.
Despite that, many say America’s labor market looks pretty strong right now, with the unemployment very low at 5%. Surveyed economists believe the unemployment rate dropped to 4.9% in May, where it was in February and January. Prior to that, it was at that level in February 2008.
“We’re very close to full employment,” says Satya Panday, U.S. economist at S&P Global Ratings. “We will keep on improving this year but we have made huge gains.”
Here are three things to watch out for.
1. Verizon strike may hit job growth: Several economists believe U.S. job growth was hurt in May by the Verizon employee strike. About 36,000 Verizon workers went on strike for 6 weeks, demanding better pay and work conditions. During that period, they were considered unemployed.
Last week, Verizon and its employees reached an agreement after the U.S. Labor Department intervened.
Many economists dialed down their expectation for job gains in May specifically due to the strike. Wells Fargo predicts that only 135,000 jobs were added in May. Barclays is calling for 150,000 jobs. Several others are in that ballpark.
The good news is that the effect of a strike is a temporary blip and job growth typically rebounds in the following months. In this case that would be the June jobs report.
2. Federal Reserve rate hike in limbo: Fed officials, including Chair Janet Yellen, have hinted in recent weeks that they could raise interest rates at their next two-day meeting, which ends June 15. The May jobs report will be an important factor in their decision.
It’s unclear if a low jobs number will affect the Fed’s thinking given the one-time Verizon effect. But other figures, like the unemployment rate, part-time work, wage growth and the participation rate will be important to watch.
Markets haven’t moved much in recent days. But a good jobs number — something around 200,000 jobs — may make markets turn south on Friday because it would mean a Fed rate hike is likely coming soon.
3. 1 million jobs in 2016? The U.S. economy has added 769,000 jobs so far this year. If the jobs report surprises to the upside — and perhaps previous months like March and April are revised up — America could pass the 1 million jobs mark on Friday.
Last year, the economy crossed that threshold in May on its way to adding about 2.6 million jobs for all of 2015.