Economic Preview: US Employment Report

The U.S. Bureau of Labor Statistics is set to release the widely anticipated December Employment Report on Friday at 8:30 a.m. EST.

Analysts expect the unemployment rate to remain at the five-year low of 7 percent that was reached in November. Nonfarm payrolls, which measures the change in the number of people employed during the previous month, excluding workers in the farming industry, is expected to fall to 196K from the prior month's reading of 203K.

A figure beating analyst expectations in the unemployment rate and nonfarm payrolls is generally bullish for the U.S. dollar and stocks.

ADP Beats Expectations

The ADP National Employment Report, released by payroll processor Automatic Data Processing, is a measure of the monthly change in non-farm, private employment, based on the payroll data of roughly 400,000 U.S. businesses. The ADP release is widely regarded by analysts as having some predictive value in relation to the BLS nonfarm payroll report to be released on Friday.

On Wednesday, the U.S. dollar was boosted after ADP Nonfarm Employment Change came in at 238K, exceeding analyst expectations of 200K and rising from the prior reading of 229K.

Expired Unemployment Benefits

Unemployment benefits for 1.3 million long-term unemployed Americans expired on Dec. 28, 2013, potentially impacting consumer spending. However, Senate Democrats will try to renew the Emergency Unemployment Compensation program for another year on their return in early January.

Federal Reserve Monetary Policy

The Fed announced in December that starting in January, it will taper its monthly bond buying to $75-billion from the $85-billion pace started in September 2012, citing 'meaningful' progress in the jobs market.

Speaking at the news conference following the announcement, Fed Chairman Ben Bernanke emphasized that Fed policy would remain data dependent, "On the first issue of $10 billion, again we say we are going to take further modest steps subsequently so that would be the general range but again I want to emphasize that we are going to be data dependent. We could stop purchases if the economy disappoints, we could pick them up somewhat if the economy is stronger."

Unemployment Threshold

The Fed has stated that it won’t raise interest rates until after the unemployment rate reaches a 'threshold' of 6.5 percent or lower, signaling that accommodative policy could last well into the future.