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- A Strong March Leads to a Surge in Chinese GDP in Q1 2023
- Durable Goods Retail Sales Suffer from High Interest Rates and Wary Consumers
- Choppy GDP Means UK Should Avoid Q1 Recession
- Japanese Consumer Confidence Jumps to Highest Level in Over a Year
- The End of Summer Sees the End of Disinflation in Europe
- Labor Market Indicators are Starting to Unify on Easing in Hiring
- Inflation and Tight Financial Conditions Weigh on the German Consumer
- Euro Area Money Supply Contracts for the First Time Since 2010
- Dismal Economic Data Out of Germany
- Core Durable Goods New Orders See Gentle Uptrend in July
- More UK Data Pointing to Q3 Decline
- Whispers of a UK Contraction in Q3
- Japan's Core Inflation Resumes Uptrend in July
- Early July Economic Data Leads to a Sharp Increase in Q3 Growth Expectations
- UK CPI: Energy Inflation Crashes but Services Inflation is Still Sticky
- China's Weak Start to Q3 Means More PBoC Easing
- A Breather for the Eurozone as Inflation Hits Two-Year Low
- Germany's September CPI Report: A Clearer Picture of Inflation Trends
- US Manufacturing Demonstrates Resilience Amidst Volatility in August
- The ECB Prepares to Address Excess Liquidity Through the MRR
- Bank of Japan is Too Optimistic on Inflation
- The Bank of England Pauses in a Near Split Decision
- UK Inflation August Update: A Precursor to the Bank of England's Announcement
- Housing Starts Tumble in August Amid Rising Mortgage Rates
- US Retail Sales Grow at Fastest Monthly Rate Since the Start of the Year
- US Consumer Prices Surge in August Driven by Energy Costs
- August NFIB Survey Showed a Tough Environment for Small Businesses
- All Signs Point to a Weaker Labor Market in August
- Chinese CPI Trying to Buck the Deflation Trend
- Energy Prices Rise but the Core Disinflationary Trend is Maintained in September
- PPI's Quiet Rise and the Energy Elephant in the Room
- Small Businesses Grapple with Inflation and Financial Strain in September
- A Wacky September Jobs Report Shows Strong Labor Market
- A Look at the Fragile US Labor Market Ahead of the Nonfarm Payrolls Report
- Thoughts on GME and This Week in the Stock Market
- Record Home Price Levels Point to Strength in Post-Pandemic Economy
- The Stock Market Looks Overvalued, but It's Probably Not
- China GDP Growth Surpasses Expectations
- President-elect Joe Biden Introduces His "American Rescue Plan"
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Employment Preview: Moderating but Strong Labor Market
January 03, 2024
Another jobs report is coming this week, and it will be the biggest economic news of 2024 once it is released. However, it will be reporting on how the previous year ended and provide important context to a Fed that described job gains as having “moderated” but still “strong”. In the context of sharp monetary tightening, in 2023, that assessment is definitely fair.
In November, the establishment survey found that 199,000 jobs were added which topped both the previous month’s gain of 150,000 and the consensus estimate of 180,000. What was also noteworthy was that downward revisions were mostly inconsequential with just a -35,000 change to the September number. As these gains have moderated, the unemployment rate has started to trend upward. Despite the rate falling -0.2 ppts to 3.7% in November, it had reached 3.9% in the month before (about 0.5 ppts off the trough of 3.4% in April 2023). The Fed sees an unemployment rate of 3.8% to end 2023 which is what it has projected since September. This is significantly lower than the 4.6% projection that the Fed set in December 2022.
The consensus estimate for the nonfarm payroll increase in December 2023 sits just below the November number at 168,000 meaning that the trend of “moderating but strong” job gains is likely to continue. Analysts have also matched the Fed’s view of the unemployment rate reaching 3.8% in December. These results would be indicators of the continuation of the tight labor market where businesses are still finding their demand for labor unmet. Thus, the it is also expected that upward pressure on wages remains at the end of 2023. The consensus on that is an 0.4% MoM uptick which will push the YoY average hourly earnings gain back to 4% YoY.
An important factor in staffing levels in December is the demand for holiday shopping in the first two-thirds of the month. Mastercard reported that total holiday retail sales grew 3.1% in 2023 over 2022 with online sales up 6.3% YoY and in-store sales up 2.2% YoY. The moderate gains in consumption were likely enough to keep businesses hiring in December, but weaker in-store sales gains suggests the impact will not be large for retailers. However, food services and drinking places likely felt the need to boost their employment as holiday spending in that segment jumped 7.8% YoY. Therefore, I see the leisure and hospitality sector leading the jobs gains in the December report (around 100,000 jobs added) while the retail trade industry could lag a bit below what might be usually expected during the holiday season (around 20,000 jobs added).
In general, my expectations are that nonfarm payrolls should increase by about 150,000, and the unemployment rate should tick up to 3.8%. The latter could be a bit of an underestimation if the trend of higher participation is extended into December. November saw a strong increase of 532,000 in the labor force which pushed the participation rate up 0.6 ppts above where it was in November 2022 at 62.8%. I expect participation to continue to increase in early 2024 as consumers continue to spend down their cash stockpiles and sticky wage increases coax more people off the sidelines. This is likely one of the keys to the Fed’s path towards a looser a labor market.