Investors are looking at a packed schedule of key data releases and Federal Reserve commentary this week, even as markets pause on Thursday for a National Day of Mourning in honor of former President Jimmy Carter.
The week’s focal point will be December’s labor market data, culminating in Friday’s nonfarm payrolls report.
Deutsche Bank expects payroll growth to moderate after November’s rebound from weather disruptions and strikes.
“Headline and private payrolls should grow by 150,000 and 125,000 respectively, aligning with their six-month averages,” Deutsche Bank analysts wrote.
Analysts also anticipate a slight uptick in the unemployment rate to 4.3%.
Key economic data points
The week kicks off with Monday’s factory orders data, expected to increase by 0.6%, followed by Tuesday’s trade balance. Attention will turn to labor market indicators on Tuesday and Wednesday, with November’s JOLTS data, December’s ISM services report, and the ADP employment survey.
While the JOLTS report will provide additional context on November’s strong job growth, Deutsche Bank cautioned that the implied net hiring is “not a good predictor of revisions to nonfarm payrolls.”
The ISM services report is anticipated to show a modest rebound after November’s surprising drop, with particular focus on the employment component. The ADP survey is forecast to show private-sector job growth of about 125,000, down from 146,000 in November.
Initial jobless claims, typically released on Thursdays, will be advanced to Wednesday due to the holiday. Analysts expect claims to rise modestly to 218,000.
Friday’s consumer sentiment index is expected to slip slightly to 73.1 from 74, with analysts watching for any shifts in inflation expectations due to concerns over potential future tariffs.
Fed commentary and meeting minutes
Market participants will also closely monitor Federal Reserve communications, starting with the release of December’s Federal Open Market Committee (FOMC) meeting minutes on Wednesday. At that meeting, the Fed delivered a 25-basis-point rate cut but signaled a more hawkish policy outlook for 2025.
Deutsche Bank highlighted potential divisions among officials, particularly in light of Chair Jerome Powell’s description of the decision as a “closer call.”
The minutes are expected to shed light on how policymakers incorporated anticipated changes in fiscal, trade, and immigration policies into their forecasts.
“Core PCE inflation was revised upward from 2.2% to 2.5% in 2025, suggesting broader incorporation of policy changes,” Deutsche Bank noted.
With labor market data and Fedspeak likely to set the tone for the year, Deutsche Bank expects the Federal Reserve to maintain a cautious approach. “The labor market is expected to show clearer signs of stabilizing in the near term and ultimately retighten modestly over 2025,” analysts wrote.
Combined with lingering inflation concerns, this could keep the Fed on an extended pause, maintaining the fed funds rate above 4% into 2026.