All eyes will be on the payroll report on Friday for clues about what it means for the Fed’s next move. Indeed, the payroll report will be the most important US economic data point between now and the Fed’s next meeting at the end of July, so the stakes are high and expectations have been set. In this post we’ll highlight how this payroll report could either beat or miss expectations and what each case could mean for bonds, stocks, the USD and gold.

Market participants will likely focus on four key data points in the payroll report with the first two in the list below being by far the most relevant for the possible market reaction.

  • Change in non-farm employment between May and June (market expects 160K)
  • Average hourly earnings (market expects 3.2%)
  • Unemployment rate (market expects 3.6%)
  • Average weekly hours worked (market expects 34.4)

An employment number below ~140 could be considered a miss while a number above ~170 could be considered a beat. Earnings growth at ~3% or below could be considered a miss while a number ~3.3% or higher could be considered a beat.