We cap off Jobs Week for another month this morning with the all-important non-farm payrolls and household survey from the U.S. Bureau of Labor Statistics (BLS), known together as the Employment Situation report. Results… are in the eye of the beholder: if you’re rooting for a strong economy to have closed out a robust 2023, these are very good numbers; if you’re looking for data that will allow the Fed to put some slack in interest rates near-term, they’re a disappointment.
Headline non-farm payrolls for December reached +216K, more than 40K higher than expectations, and the highest print since 262K posted in September of last year. The Unemployment Rate remained at 3.7%, compared to expectations of 3.8%. We had thought perhaps we’d begin seeing a ramp-up off spring lows, but this is the second month in a row this rate has remained stubbornly low. The November BLS headline number was revised down to 173K from 199K originally reported.
Hourly wages matched the previous month’s +0.4%, which was expected to have come in 10 basis points (bps) lower. Year over year, consensus estimates were for a sub-4% rate for the first time in recent memory, but no dice this time: +4.1%, up 10 bps month over month. Meanwhile, Labor Force Participation fell 30 bps month over month to 62.5% — the lowest figure since January of 2022, nearly two years ago. None of these numbers imply much strain on the labor market; if anything, it still seems a bit plump. Thus, as of now, expect the Fed to keep our economy on a strict 5.25-5.50% diet going forward.
Not like a 25 bps cut was expected at the next Fed meeting later this month — it wasn’t. But a plurality of market participants had allowed themselves to get happy about the specter of a March cut, and today’s Employment Situation suggests we’re still a ways off that. Of course, over time, today’s figures could represent a mere wrinkle on an overall downward trajectory for new hires and wage gains, but to glean that from today’s results would be a rather… “extra-factual” perspective.
The Government actually brought in the highest number of new jobs last month, +52K, followed by Leisure & Hospitality at +40K and Healthcare +38K. Transportation/Warehousing actually lost -23K jobs last month, which seems anomalous to typical holiday shopping/delivery businesses on a seasonal basis. These numbers follow the private-sector payroll report from ADP ADP yesterday, which were also notably above expectations, though it depicted wage growth metrics as cooling, overall. Over revised levels in the coming month or two, it should be easier to make hash out of what we’re looking at this morning.
Pre-markets initially hated these numbers — falling from -5 on the S&P 500, -40 on the Dow and -30 points on the Nasdaq to -25, -165 and -105 minutes afterward. Early trading has leveled off a bit, splitting the difference a half hour ahead of the opening bell. Bond yields had been creeping up ahead of this report, inferring a belief the jobs market may be stronger than investors had been expecting — and they were right. Currently, we’re at 4.09% on the 10-year and 4.48% on 2s; just like today’s BLS report, the news is a bit hard to take, but far from devastating.
After today’s open, we’ll get a look at December ISM Services and Factory Orders for November. Neither carries the impact of the Employment Situation; in fact, we’re unlikely to see more consequential economic data until the December CPI report, which comes out next Thursday. A week from today, the biggest of the Wall Street banks — JPMorgan JPM, Citigroup C, Bank of America BAC, et. al. — begin reporting Q4 earnings, informally kicking off a new season of earnings reports.
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