Why The December Jobs Report Is A Crucial Indicator For US Economy's Trajectory

The upcoming December jobs report, expected to be released on Friday, will play a pivotal role in determining the future trajectory of the U.S. economy and the Federal Reserve’s monetary policy.

What Happened: CNBC reported that analysts are looking forward to the job report, which is due to be published on Friday. It will influence the Federal Reserve’s plans for rate hikes and the broader market’s outlook on the economy.

The Dow Jones estimate for December is a nonfarm payroll gain of 170,000. However, Art Hogan, chief market strategist at B. Riley Financial, the acceptable range is anywhere from 100,000 to 250,000, This range is considered to be wide, with a higher likelihood of positive results than negative.

He said, "I just feel like we have a much better receptivity to good news being good news now that we know that that's not going to induce another rate hike.”

Investors believe that the Federal Reserve has ceased raising rates and may even start cutting rates as early as March. However, a strong job number could alter this anticipated trajectory and reduce the possibility of policy easing.

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Hogan explained, “It’s just how good the news could be before you get concerned that some of the hope for rate cuts might get pushed out into the back half of the year.”

"If the wheels are coming off the economic cart and the Fed has to rush in to stimulate that, that's bad rate cuts, right? The good rate cuts are if the path of inflation continues toward the Fed's target,” he added.

 Julia Pollak, chief economist at online jobs marketplace ZipRecruiter, finds that the job market is decelerating gradually and orderly.

"I expect December to continue the trend of just gradual cooling to around 150,000 [new jobs], and possibly a small uptick in unemployment because so many people have been pouring into the workforce."

Nick Bunker, economic research director at the Indeed Hiring Lab, mentioned the changing job market where healthcare is overtaking the once-hot tech sector in terms of job openings. He termed this change as more “sustainable.”

Why It Matters: The upcoming jobs report follows a robust growth in private employment in December. The private sector in the U.S. added 164,000 new jobs, surpassing the November figure of 101,000. However, pay growth remained slow, with existing employees experiencing a 5.4% pay raise, and those switching jobs enjoying an 8% increase in earnings.

Investors are hoping that this positive trend will continue in the official jobs report, potentially influencing the Federal Reserve to reconsider its rate-cut plans.

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