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December Jobs Data Predicted to Reveal a Slowdown in Hiring and Diminishing Wage Growth

Friday morning will see the release of the December jobs report, which is anticipated to provide more evidence of a declining labor market until the end of 2023.

According to consensus estimates compiled by Bloomberg, the Bureau of Labor Statistics’ monthly labor report, which is scheduled for release at 8:30 a.m. ET, is projected to indicate that nonfarm payrolls increased by 175,000 in December while the unemployment rate marginally increased to 3.8% from the previous month. The US economy created 199,000 new jobs in November, and the unemployment rate unexpectedly dropped to 3.7%.

Based on information from Bloomberg, Wall Street will be examining the following crucial figures:

  • Unemployment rate: 3.8% vs. 3.7% before; • Nonfarm payrolls: +175,000 vs. +199,000 previously
  • Month-over-month average hourly earnings: +0.3% as opposed to +0.4% earlier
  • Year-over-year average hourly earnings: +3.9% compared to +4.0% before
  • Weekly average hours worked: 34.4 compared to 34.4 earlier

The report will act as a litmus test for whether the market can recover from a terrible start to the year following a 2023 rise. Stocks last month were driven nearly to all-time highs by investor conviction that the Federal Reserve can accomplish a “soft landing,” in which inflation declines to the Fed’s target level of 2% without a recession.

Nancy Vanden Houten, chief US economist at Oxford Economics, released a note on Thursday stating, “We expect the December employment report to show slower job growth and a further moderation in nominal wage growth, both something the Federal Reserve wants to see as it attempts to engineer a soft-landing.”

There are indications that the labor market is improving the balance between the supply and demand of workers, according to data released earlier this week. The most recent survey on job opportunities and labor turnover, released on Wednesday, showed that job openings in November reached their lowest point since March 2021.

ADP released additional job market data on Thursday, indicating that while wage growth slowed last month, private payrolls rose more than anticipated. In particular, ADP stated that the slowdown in wage growth is encouraging for the battle against inflation.

According to ADP Chief Economist Nela Richardson, “we’re returning to a labor market that’s very much aligned with pre-pandemic hiring,” a news release was issued on Thursday. “While wages didn’t drive the recent bout of inflation, now that pay growth has retreated, any risk of a wage-price spiral has all but disappeared.”