U.S. Data Jan 2-5 Led by December Employment (Non-farm Payrolls)
The data highlight of the first week of 2024 will be December non-farm payrolls on Friday. We expect no change in trend, with a 175k increase in non-farm payrolls, 125k in the private sector, a 0.3% increase in average hourly earnings and an unchanged unemployment rate of 3.7%. ADP’s estimate of private sector employment growth is due on Thursday. We expect a rise of 110k, marginally underperforming private sector payrolls. Other labor market indicators due are November’s JOLTS report on job openings on Wednesday and weekly jobless claims on Thursday. Also important will be FOMC minutes from December 13 on Wednesday. We expect increased confidence that inflation is falling but still enough caution to mean easing is not on the near term agenda. We expect slightly firmer ISM indices for December, with manufacturing on Wednesday rising to 47.5 from 46.7 and services on Friday rising to 53.0 from 52.7. Other releases scheduled are November construction spending on Tuesday, and on Friday November’s trade balance and factory orders.
A 175k payroll increase would be slower than November’s 199k though November was lifted by the return of strikers, 25k in autos and 16k in motion pictures. October’s 150k increase was restrained by the start of the auto strike. Government looks set to maintain a firm picture. 
A 125k increase in private sector payrolls would compare to 150k in November and 85k and October but would be slightly stronger than both excluding the impact of strikes. Hinting at upside risk are a stalling of an upmove in initial claims, and more supportive seasonal adjustments.
Average hourly earnings trend has been gradually losing momentum with trend now on the low side of 0.3%, and we expect a rise of 0.26% in December before rounding. This would follow an above trend 0.35% in November which was resumed up to 0.4%, which corrected a below trend 0.21% increase in October. Yr/yr growth would then slip to 3.9% from 4.0%.
There is extra uncertainty on unemployment in December with historical revisions due, though we expect any changes to be marginal. Historical revisions for non-farm payrolls data come with January’s report. We expect an unchanged rate of 3.7% assuming November is unrevised, with employment and the workforce seen delivering similar moderate gains, contrasting sharp bounced in both in November which corrected declines in October.
In the last nine months we have seen six months with the workweek at 34.4 and three at 34.3. In December we expect slippage to 34.3 after November increased to 34.4, with the leaning being that trend continues to edge slowly lower. This would leave aggregate hours worked down by 0.2% in December but up by 0.9% annualized in Q4, a modest slowing from 1.3% in Q3.
