Market Snapshot: Show us the money: Wage data in jobs report to come under scrutiny

Wage growth, or the lack of it, will be one of the most important pieces of data to come out this week in Friday’s May jobs report as investors scan the horizon for signs of an improving economy.

Stocks finished this past week lower after a GDP revision showed a 0.7% decline for the first quarter. The Dow Jones Industrial Average DJIA, -0.64%  fell 1.2% for the week, while S&P 500 Index SPX, -0.63%  declined 0.9%, and the Nasdaq Composite Index COMP, -0.55%  shed 0.4%. For the month, however, both the Dow and the S&P 500 rose about 1%, while the Nasdaq gained 2.6%.

“Hourly wage numbers are going to be more important than the employment rate,” said Russ Koesterich, chief investment strategist at BlackRock. “That’s been the missing ingredient so far.”

In late May, Federal Reserve Chairwoman Janet Yellen said recent soft wage data might be a by-product of weak productivity growth. Plus, the much ballyhooed notion earlier in the year that consumers were going to turbo-charge the economy with all the money they were saving from cheap gasoline never materialized.

Wage growth hobbles along.

Also, consumer sentiment dropped to its lowest level in six months in May, another sign the economic recovery may be sputtering. Consumers reluctant to go out and spend the money they have is what makes this Friday’s wage data so important.

“If you want the consumer to spend more, they have to make more,” Koesterich said.

That poses a bit of a Catch-22 dilemma as one economist, Jennifer Lee at BMO Capital Markets, told MarketWatch since companies are going to be reluctant to raise wages until they see more demand from consumers.

With a lull in corporate earnings, May data as a whole will be picked apart by investors to find any evidence of a rebound from a lackluster first quarter. And if the economic data remain soft, it can’t be blamed this time around on bad weather.

The following week retail sales data will carry similar weight.

The last of the few S&P 500 companies that have yet to report quarterly earnings will do so this week

Report date Company/ticker (FactSet EPS / revenue estimate)
Mon., June 1
  • PVH Corp. PVH, -0.31%  ($1.38 / $1.86 billion)
Tues., June 2
  • Medtronic PLC MDT, -1.15%  ($1.11 / $7.16 billion)
  • Dollar General Corp. DG, -0.71%  (81 cents / $4.94 billion)
Weds., June 3
  • Brown-Forman Corp. BF.B, -0.61%  (66 cents / $925.4 million)
Thurs., June 4
  • J.M. Smucker Co. SJM, -0.79%  (99 cents / $1.22 billion)
  • Joy Global Inc. JOY, -1.79%  (56 cents / $805.9 million)
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