JOBS DAY — What you need to know in markets on Friday

After a sell-off on Thursday, markets will brace for the biggest economic data report of the week and the month: the U.S. jobs report.

In the morning, the Bureau of Labor Statistics will release its employment report for the month of June.

Economists expect that report to show 178,000 nonfarm payrolls were added to the U.S. economy in June and the unemployment rate is expected to remain at a post-crisis low of 4.3%.

Wages, which are closely watched for signs of inflation popping up in the economy, are expected to rise 2.6% over the prior year. With the unemployment rate down near 4%, some economists had expected to see wages rising even faster.

After this report, which drops at 8:30 a.m. ET, comes out, investors will grapple with markets that have seen two bumpy days of trading in this holiday-shortened week with the Dow falling triple-digits on Thursday and the tech-heavy Nasdaq losing 1%.

Investors will also keep an eye on Tesla (TSLA), one of the market’s most talked about stocks because of the big vision of its founder Elon Musk, which is down 19% in just five trading days.

Tesla CEO Elon Musk

Jobs preview

In May, the BLS’ report showed that just 138,000 jobs were added to the economy, less than expected and seen as a sign by some that softness may be hitting the U.S. labor market.

Ian Shepherdson, an economist at Pantheon Macro, wrote Thursday that this number was likely negatively impacted by a “long-standing seasonal adjustment problem” with May’s data, and that this should reverse itself in June.

Shepherdson is forecasting a nonfarm payroll print of 220,000, above consensus and a figure that assumes the 30,000 May’s number was likely undercounted by is corrected.

“A 220,000 reading [on Friday] would be very helpful to those Fed officials convinced that the softer numbers between March and May were indeed ‘transitory,’ but one employment report alone won’t convince the doves,” Shepherdson writes.

Michael Gapen, an economist at Barclays, also notes that May has traditionally had seasonal adjustment issues.

“Historically, May employment is stronger when the survey week falls in the third week of the month as opposed to the second week,” Gapen writes. “History suggests that any shortfall in May employment growth due to calendar day effects will be largely reversed in June.”

Gapen is forecasting payrolls grew by 185,000 in June, just above the consensus estimate, and sees the unemployment rate declining to 4.2%.

Over at Goldman Sachs, economist Spencer Hill writes that, “Labor market fundamentals were mixed in June. While business employment surveys remained at strong levels and the Conference Board’s labor market differential rose to a new cycle high, initial jobless claims drifted higher and continuing claims increased for five consecutive weeks.

Hill adds that, “In terms of one-off effects, we expect payroll growth to benefit from the arrival of students and recent graduates into the labor force, following a pronounced drop in youth participation rates in May likely caused by the timing of the survey week… While we expect the unemployment rate to remain stable at 4.3%, we note potential upside risks accordingly.”

Goldman is forecasting nonfarm payrolls grew by 180,000 in June, just slightly above the current consensus estimate.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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