Investors are on edge ahead of Friday’s release of the December nonfarm payrolls (NFP) report, which could offer clues about Federal Reserve policy and market direction.
Most analysts are predicting moderate job growth in December 2024, with consensus estimates pointing to 153,000 jobs added, aligning with the six-month average.
Projections vary slightly, with some economists forecasting 160,000 jobs, signaling a slowdown from November's robust 227,000 gains. Broader estimates range between 150,000 and 195,000 new jobs.
The unemployment rate is widely expected to remain unchanged at 4.2%.
Larry Tentarelli, chief technical strategist for Blue Chip Daily Trend Report, highlighted the potential for an upside surprise in the jobs data, which could jolt bond and equity markets.
“We believe that investors should be prepared for a higher-than-forecast number, which could send bond yields higher,” Tentarelli said, emphasizing the potential for sharp trading ranges across asset classes.
The strategist also noted the slowdown in private payroll growth, as indicated by ADP data released Wednesday. “Although the ADP December payrolls data was reported yesterday at 122,000, down from 146,000 in November, investors should be prepared for a potential upside surprise in NFP tomorrow,” he added.
Looking ahead to Federal Reserve policy, Tentarelli believes that the Fed is on hold, at least for Q1 of 2025.
“If NFP misses by a wide margin to the downside, and/or if the unemployment rate (forecast for 4.2%) overshoots to the upside, it should increase the odds of further rate cuts in 2025. Currently, that is not our forecast, however,” he said.
The December employment report is due at 8:30 am ET Friday.