May 28, 2024

December jobs report expected to show hiring slowdown, declining wage gains

The December jobs report is set for release Friday morning and is expected to show more signs of a cooling labor market to finish 2023.

The monthly labor report from the Bureau of Labor Statistics, slated for release at 8:30 a.m. ET, is expected to show nonfarm payrolls rose by 175,000 in December while the unemployment rate ticked up to 3.8% from the previous month, according to consensus estimates compiled by Bloomberg. In November, the US economy added 199,000 jobs while unemployment unexpectedly fell to 3.7%.

Here are the key numbers Wall Street will be looking at, according to data from Bloomberg:

  • Nonfarm payrolls: +175,000 vs. +199,000 previously

  • Unemployment rate: 3.8% vs. 3.7% previously

  • Average hourly earnings, month-on-month: +0.3% vs. +0.4% previously

  • Average hourly earnings, year-on-year: +3.9% vs. +4.0% previously

  • Average weekly hours worked: 34.4 vs. 34.4 previously

The report will serve as a test for whether the market can shake off a dismal start to the new year after a rally to end 2023. Investor belief that the Federal Reserve can achieve a so-called “soft landing,” where inflation retreats to the Fed’s 2% goal without a recession, drove stocks close to all-time highs last month.

“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,” Oxford economics lead US economist Nancy Vanden Houten wrote in note on Thursday.

Data released earlier this week showed signs the labor market is coming into a better balance between worker supply and demand. On Wednesday, the latest Job Openings and Labor Turnover Survey revealed job openings in November hit their lowest level since March 2021.

Additional labor market data out Thursday from ADP showed private payrolls increased more than expected last month, while wage growth continued to slow. Specifically, ADP noted that the decline in wage gains are a welcome sign in the fight against inflation.

“We’re returning to a labor market that’s very much aligned with pre-pandemic hiring,” ADP chief economist Nela Richardson said in a Thursday press release. “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.”

If Friday’s BLS data shows the predicted 3.9% annual wage gain for the month of December, it’d be the first time wage growth has fallen below 4% since May 2021.

Still, while on the right path, EY chief economist Greg Daco told Yahoo Finance that wage growth is “still a bit too high for comfort.” In the long run, he’s looking for that number to come down closer to 3%.

And whether a soft landing can be achieved will depend on how much the labor market cools.

“The story for 2024 is going to be one of finding balance,” Daco said. “Growth, I think it’s undeniable that the labor market growth that we’ve seen over the past year is indeed slowing…But I think that as we navigate through the rest of the year, that essentially, the key question is whether we continue to see resilient labor demand, or whether we see more of a pullback after the normalization.”

NEW YORK, NEW YORK - OCTOBER 13: A group of construction workers holds a meeting about an underground pipe repair on October 13, 2023 in New York City. (Photo by Robert Nickelsberg/Getty Images)

NEW YORK, NEW YORK – OCTOBER 13: A group of construction workers holds a meeting about an underground pipe repair on October 13, 2023 in New York City. (Photo by Robert Nickelsberg/Getty Images) (Robert Nickelsberg via Getty Images)

Josh Schafer is a reporter for Yahoo Finance.

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