For once, the upcoming jobs report may not be the most critical of all time.
Federal Reserve officials have signaled that an interest-rate increase is in play for their December meeting, with both markets and economists now anticipating that normalization will begin less than two weeks from now. That means the payrolls data will probably offer more information about the pace of tightening in the months ahead than on the timing of the first hike.
"It would have to be a very large surprise — both in November and potentially a downward revision to October — to really change the outlook enough for the Fed to stop and reconsider the hike in December,'' said Laura Rosner, a U.S. economist at BNP Paribas in New York.
Here's what economists will be watching when the Labor Department report is published at 8:30 a.m. on Friday:
Clarity on the trend
Payrolls probably climbed by about 200,000 last month following a 271,000 surge in October that was the biggest this year, according to the median forecast of a Bloomberg survey of economists. The unemployment rate is expected to hold at a seven-year low of 5 percent,.
While some slowdown from October is to be expected, economists are looking for confirmation that hiring remains solid after payroll gains decelerated sharply in August and September. Friday's data will do a lot to clarify which trend prevails.
Payrolls growth would have to be severely disappointing — closer to 100,000 or less — for it to prevent the Fed from hiking, said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina.
The signal from policy makers regarding an increase this month has been so clear that "to not do it would risk adding uncertainty to financial markets right at year-end,'' he said. ``That might do more harm to the economy than raising interest rates would."
Fed Chair Janet Yellen this week warned against waiting too long to end the era of near-zero interest rates, saying that it could force the central bank to tighten too quickly. That would "risk disrupting financial markets and perhaps even inadvertently push the economy into recession," she told the Economic Club of Washington on Wednesday. Yellen used similar language in testimony before Congress’s Joint Economic Committee on Thursday.
Retailers added some 43,800 workers in October as they geared up for their busiest shopping season of the year. It was the industry's strongest pace of hiring for that month since 1996.
November is usually the bigger month for holiday hiring, said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC in New York. As a result of the retailers' head start, payroll growth for the industry last month may be more muted.
"They got started on the seasonal hiring as early as they could," he said. "Maybe everything just got pushed forward, so some of the hiring that would have taken place in November got pulled into October." Should the typical December hiring have taken place last month, that could depress the readings since retail payrolls have fallen in seven of the last eight Decembers.
Milder temperatures in some parts of the country may help offset any drag from a slowdown in retail hiring last month, Stanley said. Industries like construction, where harsh winter weather can damp job growth, may have been able to add workers instead.
"The weather in general was supportive — not stormy, not overly cold," he said.
Hourly pay climbed 2.5 percent in October from the year before, the most since July 2009. While that's the kind of pickup in wage growth that economists have been projecting as the labor market tightens, one month doesn't make a trend.
"You want to see a continuation of that," said Jacob Oubina, a senior U.S. economist at RBC Capital Markets LLC in New York. "As we continue to chip away at the unemployment rate and continue to fall below that natural rate, which is probably right around 5 percent, the wage pressures will continue to intensify."
Economists are calling for average hourly earnings to climb 0.2 percent from the month before and 2.3 percent from a year ago.
Faster wage growth may help get inflation closer to the Fed's 2 percent target, which hasn't been met since April 2012. The sluggish trajectory of earnings has been one of the great mysteries of the economic expansion, with some experts citing it as proof that there's still plenty of slack left in the labor market.