Friday’s jobs report will be a big signal for a market looking for good news

When
the
December
jobs
report
is
released
Friday
morning,
markets
will
be
looking
for
a
number
that
hits
a
sweet
spot
between
not
so
robust
as
to
trigger
more
interest
rate
hikes
and
not
so
slow
as
to
raise
worries
about
the
economy.

In
market
jargon,
that
quest
for
the
middle
is
sometimes
referred
to
as
a
“Goldilocks”
number
—
not
too
hot,
not
too
cold
—
that
can
be
difficult
to
find.

But
in
this
case,
the
good
news
is
that
the
range
looks
to
be
pretty
wide
with
a
higher
probability
of
good
news
than
bad.

While
the
Dow
Jones
estimate
is
for
a
nonfarm
payrolls
gain
of
170,000,
Art
Hogan,
chief
market
strategist
at
B.
Riley
Financial,
said
the
acceptable
range
is
really
something
like
100,000-250,000.

“I
just
feel
like
we
have
a
much
better
receptivity
to
good
news
being
good
news
now
that
we
know
that
that’s
not
going
to
induce
another
rate
hike,”
Hogan
said.
“It’s
just
going
to
push
off
a
rate
cut.”

As
things
stand,
markets
figure
the
Federal
Reserve
is
done
hiking
rates
and
could
start
cutting
as
early
as
March,
eventually
lopping
off
1.5
percentage
points
from
its
benchmark
rate
by
the
end
of
2024.
Recent

news
coming
out
of
the
Fed
is
pushing
back
at
least
a
little
on
that
anticipated
trajectory,
and
a
strong
jobs
number
could
dampen
the
likelihood
of
policy
easing
that
quickly.

“If
we
were
to
get
above
[250,000],
then
people
might
look
at
that
and
say
we
have
to
cancel
March
as
a
potential
rate
cut
and
maybe
take
one
off
the
table
for
this
year,”
Hogan
said.
“Frankly,
we
know
we’re
at
a
place
now
where
the
Fed
is
done
raising
rates.
So
if
that’s
the
case,
clearly
good
news
could
be
good
news.
It’s
just
how
good
the
news
could
be
before
you
get
concerned
that
some
of
the
hope
for
rate
cuts
might
get
pushed
out
into
the
back
half
of
the
year.”

Markets
have
gotten
off
to

a
rocky
start
in
the
new
year
as
rate-sensitive
Big
Tech
stocks
have
lagged.
Traders
are
anticipating
that
the
Fed
will
ease
up
on
monetary
policy,
though
such
an
aggressive
schedule
of
cuts
could
imply
something
more
than
winning
the
battle
against
inflation
and
instead
may
infer
economic
weakness
that
forces
the
central
bank’s
hand.

Hogan
said
investors
should
be
taking
that
into
consideration
when
thinking
about
the
impact
of
lower
rates.

“This
is
a
market
that’s
gotten
itself
a
little
jazzed
up
about
rate
cuts
and
when
they’re
going
to
happen,”
he
said.
“People
need
to
focus
on
why
they’re
going
to
happen.”

“If
the
wheels
are
coming
off
the
economic
cart
and
the
Fed
has
to
rush
in
to
stimulate
that,
that’s
bad
rate
cuts,
right?”
he
added.
“The
good
rate
cuts
are
if
the
path
of
inflation
continues
toward
the
Fed’s
target.
That’s
a
good
rate
cut.
So
if
that
doesn’t
happen
until
the
second
half,
I’m
fine
with
that.”

As
usual,
markets
will
be
looking
at
more
than
the
headline
payrolls
number
for
the
health
of
the
labor
market.

Wages
have
been
a
concern
as
an
inflation
component.
The
expectation
for
average
hourly
earnings
is
a
12-month
growth
rate
of
3.9%.
If
that
proves
accurate,
it
will
be
the
first
time
wage
gains
come
in
under
4%
since
mid-2021.

The
unemployment
rate
is
expected
to
tick
up
to
3.8%,
which
will
still
keep
it
below
4%
for
23
straight
months.

“The
overall
picture
is
one
in
which
the
labor
market
is
gradually
decelerating
in
a
very
orderly
fashion,”
said
Julia
Pollak,
chief
economist
at
online
jobs
marketplace
ZipRecruiter.
“I
expect
December
to
continue
the
trend
of
just
gradual
cooling
to
around
150,000
[new
jobs],
and
possibly
a
small
uptick
in
unemployment
because
so
many
people
have
been
pouring
into
the
workforce.”

The
labor
force
grew
by
about
3.3
million
in
2023
through
November,
though
the
trend
has
had
little
impact
on
the
unemployment
rate,
which
was

up
just
0.1
percentage
point
from
the
same
month
in
2022.

However,
Pollak
noted
that
the
hiring
rate
is
still
below
where
it
was
prior
to
the
Covid
pandemic.
The
quits
rate,
a
Labor
Department
measure
that
is
looked
at
as
a
sign
of
worker
confidence
in
finding
new
employment,
has
tumbled
to
2.2%
after
peaking
at
3%
during
the
so-called
Great
Resignation
in
2021
and
2022.

The
jobs
picture
overall
has
shifted
since
then,
with
the
once-hot
tech
sector
now
lagging
in
terms
of
job
openings
and
health
care
taking
the
lead,
according
to
Nick
Bunker,
economic
research
director
at
the
Indeed
Hiring
Lab.

“We’re
seeing
a
labor
market
that
is
not
as
tight
and
as
hot
as
what
we
saw
the
last
couple
years,”
Bunker
said.
“But
it’s
got
into
a
groove
that
seems
more
sustainable.”