WASHINGTON (AP) — Friday’s monthly jobs report will likely mark a pivotal moment for the economy and the Federal Reserve.

If it shows that hiring was weak in August and that the unemployment rate rose — similar to the unexpectedly soft figures for July — it would heighten worries that the job market is stumbling. The Fed might then seek to deliver a stimulus with a larger-than-usual interest rate cut of a half-percentage point when it meets later this month.

If, on the other hand, hiring picked up from July’s gain of just 114,000 or if the unemployment rate fell from 4.3% — the highest level in three years, though still low by historical standards — it would suggest that the labor market remain stable, though slowing. The Fed would probably cut its key rate from its 23-year high by a more modest quarter-point, with further rate cuts to follow in the coming months.

Either outcome could also help shape the remaining two months of the presidential race. Another sluggish hiring report would fuel former President Donald Trump’s claims that the Biden-Harris administration has overseen a worsening economy.

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A healthier report, though, would arm Vice President Kamala Harris with evidence that the job market is still motoring ahead even while inflation has tumbled from a four-decade peak to near the Fed’s 2% target, opening the door to rate cuts. Reductions in the Fed’s benchmark rate will eventually lead to lower borrowing costs for a range of consumer and business loans, including mortgages, auto loans and credit cards.

The two presidential nominees outlined dueling economic plans in speeches this week, with Trump promising to cut corporate taxes to 15% and eliminate taxes on tips and Social Security income. Harris has vowed to expand tax deductions for start-up companies while raising the corporate tax rate to 28%.

Economists have estimated that the government will report Friday that employers added 160,000 jobs in August and that the unemployment rate slipped back to 4.2%. Since hitting a half-century low of 3.4% in April of last year, the jobless rate has risen nearly a full percentage point.

Most of the rise in the jobless rate, though, reflects an influx of people into the labor force — notably, recent immigrants as well as new college graduates — who didn’t find work right away and so were counted as unemployed. This makes the increase in unemployment less of a concern than if it were caused by waves of job cuts. The pace of layoffs, in fact, is barely above where it was before the pandemic.

Still, a slower pace of hiring is often a precursor to layoffs — one reason why the Fed’s policymakers are now more focused on sustaining the health of the job market than on continuing to fight inflation.

Recent economic data has been mixed, elevating the importance of the jobs report, which is among the more comprehensive economic snapshots the government issues. The Labor Department surveys roughly 119,000 businesses and government agencies and 60,000 households each month to compile the employment data.

On the weaker side, companies are advertising fewer job openings, and fewer workers are quitting for new opportunities. In a healthy job market, workers are more likely to quit, usually for new, higher-paying opportunities. With quits declining, that means fewer jobs are opening up for people out of work.

“New grads and returning workers are having an exceptionally hard time breaking in,” said Daniel Zhao, lead economist at the career website Glassdoor. “And so for those folks, it certainly feels even worse because they can’t get their foot in the door.”

The Fed’s Beige Book, a collection of anecdotes from the 12 regional Fed banks, reported that many employers appeared to have become pickier about whom they hired in July and August. And a survey by the Conference Board in August found that the proportion of Americans who think jobs are hard to find has been rising, a trend that has often correlated with a higher unemployment rate.

At the same time, consumer spending, the principal driver of economic growth in the United States, rose at a healthy pace in July. And the economy grew at a solid 3% annual pace in the April-June quarter.

Fed Chair Jerome Powell has made clear that he doesn’t want to see the job market weaken further, which is why a particularly poor jobs report might lead the Fed to announce a deep rate cut this month.

Later Friday, Christopher Waller, a member of the Fed’s Board of Governors, is scheduled to discuss the economic outlook in a speech at the University of Notre Dame. Waller, an influential member of the governing board, may provide insights into the Fed’s next moves.

Substantial rate cuts by the Fed could spur some companies to start hiring more quickly, some labor market experts say.

“Everyone’s in a bit of a holding pattern,” said Becky Frankiewicz, president of North America at staffing giant Manpower. “Everyone’s watching that mid-September meeting, to free up and start spending.”

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