The US labor market probably remained sturdy while wage gains continued to ease as 2023 drew to a close, setting up for steady economic growth and waning inflation in the coming year.
Government data on Friday are projected to show payrolls in the world’s largest economy increased by 170,000 in December. That would cap a year in which some 2.7 million jobs were added.
The median forecast in a Bloomberg survey of economists also calls for a 3.9% increase in average hourly earnings from a year earlier, the smallest annual gain since mid-2021. The unemployment rate is projected to tick up to 3.8%.
A Moderating, Yet Healthy US Job Market
Payrolls growth seen capping a solid year for American workers
Source: Bureau of Labor Statistics, Bloomberg
While the pace of hiring is moderating, a resilient labor market supports views that the economy will continue to expand in 2024, albeit at a slower rate. That’s consistent with the Federal Reserve’s latest economic projections. Fed officials also see inflation cooling.
On Wednesday, the central bank will issue minutes of policymakers’ December meeting, at which officials signaled an end to their aggressive campaign of hiking interest rates. The Fed held its benchmark rate at the highest level since 2001 and penciled in no further increases.
The quarterly projections showed Fed officials expect to lower rates by 75 basis points next year.
What Jobadvisor Economics Says:
“Job gains have been concentrated in just two acyclical sectors — health care and government — with flat to negative growth in most industries. As a result, wage growth will moderate in December. Though a Fed pivot may have stunted recessionary dynamics in the labor market, that dynamic isn’t clear enough yet, and our base case remains a persistent increase in the jobless rate in 2024.”
Also on Wednesday, the government will issue figures on the number of job openings across the economy in November. Economists project vacancies rose from a more than two-year low a month earlier, while remaining consistent with a moderation in labor demand.
The first week of the new year will also include closely watched surveys of manufacturing and service activity in December.
Meanwhile, in Canada, jobs data for December due on Friday will reveal whether the labor market continued to ease as 2023 came to a close.
Elsewhere, a likely bump up in euro-zone inflation, along with purchasing manager surveys in China, may draw the most attention as investors ease into the new year.