As the release of the December jobs report nears, anticipation rises, impacting gold, USD, and stocks with expected market volatility.
Wall Street will closely watch this Friday as the U.S. Bureau of Labor Statistics reveals the eagerly-awaited December employment data. Analysts forecast that U.S. employers added 150,000 workers to their payrolls last month, a modest figure compared to the 199,000 jobs gained in November. This report is poised to significantly influence the Federal Reserve’s monetary policy outlook, potentially affecting the timing of the first rate cut.
The market is preparing for increased volatility across various assets as the employment data unfolds. The December report holds particular importance due to its potential implications for the Fed’s stance and the timing of future rate adjustments. Given the recent dovish tone adopted by the Federal Reserve in December, signaling a willingness to reduce borrowing costs in 2024, the markets are poised to carefully analyze the data to gauge the central bank’s next moves.
Estimates also suggest that the unemployment rate slightly increases, ticking up to 3.8% from the previous 3.7%. Observers view this change as indicating a more balanced equilibrium between job market supply and demand.
High Anticipation for December Jobs Report Impact on Markets
Wage growth will be another focal point, with average hourly earnings expected to rise by 0.3% month-on-month. This shift is a positive development for the U.S. central bank, bringing the annual rate to 3.9% from the previous 4.0%. The Federal Reserve closely monitors wage growth for its implications on inflationary patterns, adding another layer of significance to this aspect of the report.
The Federal Reserve, in its December meeting, adopted a dovish posture, hinting at potential reductions in borrowing costs throughout 2024 while not altogether abandoning its tightening bias. The market, however, interpreted the message as a signal for a more pronounced easing cycle this year.
Implied probabilities currently place the odds of a quarter-point rate cut at the March Federal Open Market Committee (FOMC) meeting at 62%, a slight decrease from the previous week’s 72%. Analysts suggest that if hiring surpasses expectations and wage pressures accelerate, the likelihood of an easing cycle starting in the first quarter will diminish. This scenario could set the stage for Treasury yields and the U.S. dollar to extend their recovery, impacting gold prices and the equity market.
Conversely, in a scenario of sluggish job growth and further moderation in average hourly earnings, the Fed’s policy outlook is likely to shift more dovish, increasing expectations of a March rate cut and putting downward pressure on yields and the U.S. dollar. In such circumstances, gold prices and risk assets, including technology stocks, could experience a strong rally. Analysts note that while still positive, any non-farm payroll figure below 100,000 could trigger these market reactions. As the market eagerly awaits the release of the December jobs report, traders and investors brace themselves for potential shifts in various financial indicators.