U.S. Job Growth Cools, Fed Eyes Soft Landing

Expecting a Slowdown in Job Creation

As the year draws to a close, all eyes are on the U.S. as it braces for a likely cooldown in job growth for December 2023. This anticipated change is largely due to the waning influence of short-lived boosts such as the automobile industry and Hollywood strikes that propped up November’s employment numbers.

With the release of the nonfarm payroll data from the U.S. Labor Department set for 8:30 AM ET, experts predict a more moderate increase of around 170,000 new jobs in December, a noticeable dip from November’s 199,000 additions. This expected deceleration seems to be in line with the Federal Reserve’s careful maneuvering toward a “soft landing” to soften any potential economic bumps ahead.

Insights into Unemployment and Wages

Despite the forecasted dip in job growth, the unemployment rate looks set to remain robust, with just a slight rise to 3.8%, proudly holding under the 4% mark for the twenty-third month in a row. At the same time, annual average hourly earnings are predicted to edge up by 3.9%, sliding under the 4% mark for the first time since mid-2021.

If wages do slow as anticipated, it could be a silver lining for the Federal Reserve, which is striving to bring labor market demand and supply into better balance to help tame the flames of inflation.

The Impact of the Fed’s Game Plan on the Markets

Lately, the Federal Reserve has been playing it cool, leaving its key interest rate unchanged through three consecutive meetings. On top of that, it’s been hinting at possible rate cuts in the upcoming year. That said, should inflation stubbornly stick around or even pick up pace, the Fed might have to rethink its approach, potentially shaking up what the market’s been expecting.

Investors, take note: The upcoming jobs data could be a game-changer for financial markets, possibly swaying Treasury yields and the direction of stock prices, which have recently simmered down after a red-hot nine-week streak.

Analyst Takes on the Labor Market and Economy

Over at SA, analyst Damir Tokic has an eye on the upcoming labor data, predicting it will likely back up the current trend of easing inflation, possibly paving the way for the Federal Reserve to trim rates as many have been predicting.

Tokic is keeping a watchful eye on the bond market’s reaction, knowing it could be the key to understanding how the stock market will swing, particularly after a strong run at the year’s end. Chris Lau, the Investing Group Leader at DIY Value Investing, echoes the sentiment that Friday’s job report isn’t expected to throw any curveballs in the market’s rate expectations, hinting that we might just see more of the same on the economic horizon.