As we step into 2024, this is where we begin to see the last of 2023 data filter through, including the widely followed US Employment Situation Report for December, released at 1:30 pm GMT today.

According to Bloomberg’s median estimate, economists expect that the US economy generated approximately 175,000 new jobs in the month of December; the estimate range is somewhat wide, however: between 235,000 and 80,000.

Bloomberg

In terms of unemployment, economists estimate that the unemployment rate ticked higher in December to 3.9%, up from 3.8% in November. For wages, the year-on-year estimate for December forecasts earnings marginally slowed to 3.9%, a touch lower than 4.0% in November (estimate range: between 4.0% and 3.8%), while between November and December, the market consensus is for a slight dip to 0.3% from 0.4%.

Employment Data

You will note that this week observed a slew of US job numbers trickle through, including Tuesday’s JOLTs Job Openings, which nudged lower in November to 8.79 million, aiding the Fed’s soft landing. The release also revealed that Job Openings hit their lowest level in nearly three years and was largely in line with market estimates. Also that day, Tuesday’s ISM manufacturing PMI release revealed that the US manufacturing activity for December remained in contractionary space (< 50.0) for a 14^th consecutive month, though the gauge did nudge higher to 47.4, up from 46.7 in November. Interestingly, the employment component jumped to 48.1 in December from 45.8 in November.

Yesterday’s ADP non-farm employment, although not an economic indicator with a good track record of forecasting today’s headline event, revealed that the US economy produced 164,000 new jobs in December.

Ahead of the Event

Should the NFP release hit/exceed the upper estimate range (235,000), this is likely to see investors pare rate-cut bets for the year and underpin the buck (weigh on equities and bonds). Conversely, a lower-than-expected NFP print today could bolster equities/bonds and suppress the dollar.

However, the Fed, according to the latest SEP, project three rate cuts this year, with a rate hike appearing firmly off the table. As evident from the Fed’s dot plot, Fed members forecast the Fed Funds target range to be 4.50%-4.75% this year or 75bps of cuts. Market pricing, nonetheless, projects around six rate cuts by the end of 2024, with the first 25bp rate cut fully priced in for May. Yet, it is worth pointing out that there is currently a 62% probability priced in for a 25bp cut as soon as the March meeting.

Bloomberg

Market Snapshot Ahead of the Release

The US Dollar Index is evidently trending south (it has been since the 107.35 top in October 2023), and thanks to a recent pullback from lows of 100.62, daily resistance is calling for attention at 102.92.

Spot gold in $ terms is on the back foot this week, fading resistance at $2,075; the yellow metal is clearly demonstrating an uptrend, and a break of resistance unearths the all-time high at $2,148.

In the equities space, the S&P 500 is on track to pencil in its first weekly decline since late October last year and form a weekly evening star candlestick formation. Although stocks (and bonds) have suffered so far in 2024, the uptrend in this market is undeniable, with all-time highs fast approaching at 4,818. However, in view of room to target weekly support as far south as 4,595 and the weekly chart’s Relative Strength Index (RSI) establishing negative divergence ahead of overbought space, profit taking (and counter-trend selling) could be seen in the coming weeks.

Charts: TradingView

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