Solid US job gain in May could set stage for summer Fed hike

— Friday’s U.S. jobs report for May will provide a crucial piece of data for the Federal Reserve to weigh in deciding whether to raise interest rates later this month.

Economists have estimated that employers added 160,000 jobs for a second straight month, according to data provider Fact-Set. That would be a solid gain, though below the average increase of 232,000 for the past year. The unemployment rate is expected to remain at a low 5 percent.

Many analysts think the Fed will refrain from raising its key short-term rate when it meets in two weeks before increasing rates at its subsequent meeting in late July. It might take a much bigger-than-expected job gain in May — well above 200,000 — to nudge the Fed toward a rate hike this month.

Last month’s hiring figure may have been distorted by a strike at Verizon, which caused about 40,000 workers to walk off the job. The striking employees, now back to work, won’t be counted as employed during May — a fact that could depress the job gain.

The strike could also lower other figures in the jobs report, such as average hourly pay. As a result, the Fed might find it hard to derive a clear picture of the job market from Friday’s data.

Still, the report will be scrutinized for evidence that the economy has accelerated after a slump early this year. The government has estimated that the economy grew at just a 0.8 percent annual rate in the January-March quarter. More recent figures indicate that growth has since strengthened. But the Fed may want additional data to ensure that the improvement is sustained.

Investors collectively estimate only a 21 percent chance that the Fed will raise rates on June 15, according to futures trading on the Chicago Mercantile Exchange. The likelihood rises to 60 percent for the Fed’s July meeting. Both figures are a marked shift from a month ago, when June and July were seen as much less likely.