CANCEL YOUR 3-DAY WEEKEND: There's a jobs report on Friday, and it's a huge deal

On Friday, we get the March Jobs Report, which comes at a controversial moment for the economy.

The report is expected to show nonfarm payrolls grew by 250,000 with the unemployment rate holding steady at 5.5%.

Another closely watched part of this report will be average hourly earnings, which have been growing at around a 2% annual pace in the last several months and seems to be the last piece of the labor market puzzle. Expectations are for wages to grow 2% in March.

Labor market indicators since the February jobs report have been strong, but some people think that there is a "contradiction" in the economy. On balance, economic indicators have missed over the last several months while the Atlanta Fed's Q1 GDP tracker has declined to indicate the economy didn't grow at all during the first quarter.

This contradiction, however, isn't exactly what it's cracked up to be, as the big disappointment has been in economic reports relative to expectations, not that economic reports have necessarily been signaling bigger problems in the economy.

Of course, every economic data point is what you make of it.

The job market is on fire

The labor market, in contrast to some economic data, has been absolutely on fire.

• In February, the economy added 295,000 jobs.
• In January, the economy added 239,000 jobs.
• In December, the economy added 329,000 jobs.
• In November, the economy added 423,000 jobs.

FREDJob gains keep beating expectations. The unemployment rate, at 5.5%, is at its lowest level since May 2008 and 2014 was the best year for overall job creation since 1999.

And this comes on the background of initial jobless claims which are at their lowest level since 2000 and announcements from major service-industry employers like McDonald's, Wal-Mart, and Target that they will raise wages for hourly employees.

Following Thursday's initial claims report, Ian Shepherdson at Pantheon Macroeconomics wrote, "The claims numbers simply do not support the idea that the first quarter slowdown in growth is indicative of some underlying malaise in the economy."

It's all about the Fed

What the market is fixated on right now is when the Fed will raise interest rates. Fed officials, including Fed chair Janet Yellen, have signaled that it will likely be appropriate for the central bank to raise rates some time this year, which would mark the first rate hike since July 2006. When this year, of course, is the question.

Currently the Fed judges that there is still "slack" in the labor market, with the FOMC moving its "central tendency" - or NAIRU range, the unemployment rate at which inflation begins to accelerate - for the unemployment rate to 5.2%-5.0% from 5.5%-5.2% in its latest summary of economic projections released in March.

FREDJob openings are surging. But this move came only after the unemployment rate breached the upper-level of the Fed's NAIRU range in February after the unemployment rate fell to 5.5%.

In short, we appeared to be right on the edge of reaching "full employment," and then the Fed moved the goalposts. The market saw this as the Fed taking a pessimistic view on the economy, though we argued at the time that this was probably a misreading of the Fed's outlook.

That we won't, in short order, move back down towards the Fed's "full employment" target seems a hard argument to make given that most all of the labor market conditions - notably low initial claims numbers and surging job openings - that brought us to this level over the last several months have remained in place.

Close reading

All Jobs Reports - and really all economic data reports - are mostly about people confirming their priors on the economy.

If there are a lot of jobs created, we'll hear critics clamor about how these are "low quality" jobs. If fewer jobs are created, we'll hear about how US economic growth has stalled (with a follow-up about how underwhelming economic growth has been since the financial crisis anyway).

Pantheon MacroeconomicsThe labor market keeps beating the Fed's expectations.But if the Fed is to be believed that conditions will likely be right for interest rates to rise this year, then each jobs report has stakes that grow increasingly higher.

On a payroll gains basis, the Jobs Report has topped expectations for four straight months. And ahead of February's report, we highlighted a chart from Ian Shepherdson at Pantheon Macro that noted how the unemployment rate has consistently outperformed the Fed's expectations.

The debate here is and will be multi-dimensional: what do you think about the Jobs Report? What does the Fed think about the Jobs Report? What do you think the Fed should think about the Jobs Report? What do you think the Fed actually thinks about the Jobs Report?

And so on.

The Fed has remained cautious, as is its wont, on whether the labor market is fully repaired. But evidence in the last several months shows that the most important part of the economy - the labor market - is humming along and showing no signs of stopping.