TORONTO - Investors will be taking in major economic data this week that will give them a better idea of the pace of the American economic recovery — and likely set the tone for trading during September, which has a wicked reputation as one of the toughest trading months of the year.

"You would think it would be a quiet week before Labour Day but in fact it’s probably going to be one of the busier ones," said Colin Cieszynski, market strategist at CMC Markets Canada.

The TSX finished higher last week as investors took in a generally positive run of earnings from four of the big Canadian banks and were relieved that while a revision of second-quarter U.S. growth lowered the initial estimate, it wasn't as bad as what was expected. The U.S. economy grew at an annualized rate of 1.6 per cent, better than the expected reading of 1.4 per cent and down sharply from the original reading of 2.4 per cent.

The TSX gained 158 points or 1.34 per cent while weak housing and durable goods orders data helped push the Dow Jones industrials down 63 points or 0.06 per cent during the week.

For the coming week, investors are looking ahead to two of the most important reports that come out during any month — the U.S. non-farm payrolls report and the Institute for Supply Management's index on the U.S. manufacturing sector.

The ISM report comes out on Wednesday and there have been fears that the index could fall below 50, signalling a contracting manufacturing sector, after the Philadelphia Fed survey earlier this month showed a sharp drop.

But John Johnston, chief strategist of the Harbour Group at RBC Dominion Securities, pointed out that the Philly Fed survey and some of the other regional surveys tend to be very volatile.

There’s no doubt the ISM is falling.

"It went up to 60 and now it’s drifting down ... and remember that 50 is the break even for manufacturing. To signal a recession for the economy, it’s about 42," Johnston said.

"So the consensus is looking for a bit of slowing to 53 from 55.5 but that’s the kind of number, if that disappoints, that could put people in a very unpleasant mood."

But it’s the non-farm payrolls report for August which is released on Friday that is most widely-anticipated since "the employment number is the most timely comprehensive measure of the overall U.S. economy," Johnston said.

"And the reality is until we get some sustained decent job creation, we're not out of the woods. When you’re creating 100,000 or less private sector jobs every month, you are dealing with an economy that isn't fully in a self-sustaining recovery yet."

Expectations for the August report are extremely modest.

Economists expect the economy ditched about 105,000 jobs last month, reflecting a large decline in temporary census jobs.

But they also forecast that this will be offset by the creation of about 50,000 private sector jobs.

"So, I think as we look to next week, we’re looking at a batch of fairly bad data," Johnston added.

"I think if the consensus call of plus-40,000 private sector jobs is OK, that would be a bit of a relief."

In Canada, jobs data for August isn't released until Sept. 10. But investors will be looking to the latest reading on economic growth when Statistics Canada releases data for June and the second quarter.

Economists expect an abrupt slowing from the 6.1 per cent annualized growth posted for the first quarter and are looking for second-quarter annualized growth to come in at 2.5 per cent.

"We’ve seen it over the last month, with all the data we’ve been getting out of Canada, saying we’re easing back a little bit," Cieszynski said.

"(But) at the end of the day, we are a global trading nation and when the global economy slows, we do get impacted. We’re not an island unto ourselves."

On the corporate front, investors are looking to quarterly earnings results from Scotiabank (TSX:BNS) on Tuesday and TD Bank (TSX:TD) on Thursday.

The financials sector ended last week little changed following a mixed bag of quarterly earnings reports from four of the big banks. CIBC (TSX:CM) and National Bank (TSX:NA) handed in earnings that beat analyst forecasts while Bank of Montreal (TSX:BMO) and Royal Bank (TSX:RY) missed estimates with performance hobbled by weak capital markets.

But investors took solace from the fact that the domestic business is solid with falling provisions for bad loans.

"The core Canadian operations are just chugging right along," Cieszynski said.

"Trading revenues (will) probably always be volatile, depending on how markets go, but you’re going to get some quarters with big windfalls and some with big disappointments. That’s the nature of being exposed to the trading business. It’s not a consistent business."