US NFP Preview:
- Consensus forecasts are looking for jobs growth of +400K while the unemployment rate (U3) is anticipated to drop from 4.2% to 4.1%.
- Jobless claims are holding near their pandemic-era lows, while the December US ADP employment change report beat expectations handily.
- Will a strong US jobs support enhance concerns that the Federal Reserve accelerate policy tightening? Or did the COVID-19 omicron variant hold back the US economy? We’ll discuss these questions and more in context of the December US nonfarm payrolls report starting at 8:15 EST/13:15 GMT. You can join live by watching the stream at the top of this note.
Markets Worried About Hawkish Fed
The final jobs report of 2021 could introduce additional volatility to global financial markets at the end of an already volatile week. With the December Fed meeting minutes hinting at increasingly hawkish tendencies among policymakers, a strong showing by the December US nonfarm payrolls report and a further drop in the US unemployment rate could heighten expectations that the Fed will hike rates as early as March.
While US equity markets have not taken the rise in US Treasury yields kindly, another bump in Fed rate hike odds could prove damaging anew to both stocks and precious metals. But the US Dollar, which has benefited in recent months from speculation that the Fed is turning more hawkish, may find a boost from a strong US jobs report.
According to a Bloomberg News survey, forecasters are looking for jobs growth of +400K while the unemployment rate (U3) is anticipated to drop from 4.2% to 4.1%. Meanwhile, the US labor force participation rate is due to rebound from 61.% to a still-meager 61.9%. The December US ADP employment change report, which was released on Wednesday and came in at +807K, will likely bias expectations higher ahead of the official release this morning.
Atlanta Fed Jobs Growth Calculator (January 2021) (Chart 1)
The US economy continues to inch closer towards achieving ‘full employment’ as experienced pre-pandemic. According to the Atlanta Fed Jobs Growth Calculator, the US economy needs +484K jobs growth per month over the next 12-months in order to return to the pre-pandemic US labor market of a 3.5% unemployment rate (U3) with a 63.4% labor force participation rate.
Will a strong US jobs support enhance concerns that the Federal Reserve accelerate policy tightening? Or did the COVID-19 omicron variant hold back the US economy?
We’ll discuss these questions and more in context of the December US nonfarm payrolls report starting at 8:15 EST/13:15 GMT. You can join live by watching the stream at the top of this note.
--- Written by Christopher Vecchio, CFA, Senior Strategist
