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Jobs report: Is Street too optimistic?

Few things affect the investment outlook more than the monthly jobs number and with the latest data coming on Friday, investors are on pins and needles.

Part of the anxiety stems from last month’s number, which wasn’t great. Although the economy added 126,000 new jobs in March, the data marked a slowdown in hiring.

For April, “We’re looking for 185,000 new jobs, which is a large deviation to the downside from what the Street is expecting,” said Leigh Drogan of Estimize, a company that crowdsources estimates from both professional analysts as well as private investors.

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Given that Street estimates call for about 225,000 new jobs, the Estimize numbers suggest independent investors on Estimize are more bearish than the Street.

The takeaway would be that the winter slowdown carried into the spring, noted Mike Santoli of Yahoo Finance, and that the economy is not accelerating as quickly as investors might like.

Drogan added that it’s not only the headline jobs number that will be scrutinized. He said that Wall Street is also very eager to hear about wage growth, adding that it will likely set the time horizon for rate hikes.

“The Street is looking for 0.2%. If that number is lower than expected, I think expectations of a rate hike will get pushed back into 2016,” Drogan said. Estimize research suggests wage growth will be around 0.11%, however other economic metrics paint a different picture.

The employment cost index, a measure of wages and benefits, climbed more than expected last quarter. Steve Huber, portfolio manager of the T. Rowe Price Strategic Income Fund told Yahoo Finance that this metric may be prescient; it may suggest wage growth comes in relatively strong.

Whatever the number may be, “That’s the most important thing from Friday’s jobs report,” Drogan added. “It’s all about wage growth. The Street wants to know if the job market is getting a little tighter.”

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