Risk disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.
NFP Update | Significant job growth in US for December
BY Janne Muta, M.Sc in Finance|January 5, 2024
NFP Update - The US labour market in December 2023 demonstrated significant resilience, adding 216K jobs, substantially surpassing the market expectations of 170K. This performance, notably higher than November's revised figure of 173K, signals a robust trend in job creation. The initial market response was moderate, with the USD strengthening and yields rising, though this initial dollar-positive reaction has since faded, leaving markets seeking direction after the unexpectedly strong employment report.
Summary of this NFP update report
- The US labour market added 216K jobs in December 2023, exceeding forecasts of 170K and November's 173K. Initial reactions saw a mild USD rise and yields increase, reflecting robust job creation and economic strength, though market direction remained uncertain post-report.
- Employment gains were noted in government, healthcare, social assistance, and construction, contrasted by losses in transportation and warehousing. The unemployment rate held steady at 3.7%, with a minor decline in labour force participation to 62.5%, indicating overall labour market stability.
- Wage growth saw average hourly earnings increase to $34.27, a 0.4% rise. In response, Fed Funds futures traders adjusted their outlook, reducing the likelihood of a March rate cut from 64.6% to 55.2% and anticipating fewer rate cuts in 2024, signalling potential dollar strength.
The gains in employment were concentrated in specific sectors: government, healthcare, social assistance, and construction saw notable increases, while the transportation and warehousing sectors experienced losses. The unemployment rate held steady at 3.7%, indicating a stable labour market, despite a slight decrease in the labour force participation rate to 62.5% from November's 62.8%.
Rising wages and their economic impact
Wage trends continued to be positive, with average hourly earnings rising by 15 cents to $34.27, a 0.4% increase over the month, surpassing market expectations. This year-over-year wage growth of 4.1% points to strong labour demand and is likely to influence both consumer spending and inflation.
Fed's monetary policy adjustments
The Federal Reserve's interest rate policies are significantly shaped by these labour market conditions. The probability of a rate cut in March, initially set at 64.6% pre-NFP, has been revised down to 55.2%. Following the NFP release, futures traders adjusted their expectations from six rate cuts in 2024 to five.
Market responses and economic forecast
These adjustments in market expectations and Federal Reserve policy forecasts reflect a cautiously optimistic view of the US economy's resilience. The solid performance of the labour market, coupled with steady wage growth and a controlled unemployment rate, suggests a healthy economic environment. However, the Federal Reserve is likely to maintain higher interest rates for a longer period, potentially leading to dollar-positive outcomes.
How would you trade the markets today?
I hope this NFP Update helps you to make better informed trading decisions. Check the latest market analysis for other instruments and subscribe to receive them in your inbox as soon as they are published.
While research has been undertaken to compile the above content, it remains an informational and educational piece only. None of the content provided constitutes any form of investment advice.
TIO Markets UK Limited is a company registered in England and Wales under company number 06592025 and is authorised and regulated by the Financial Conduct Authority FRN: 488900
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.
DISCLAIMER: TIO Markets offers an exclusively execution-only service. The views expressed are for information purposes only. None of the content provided constitutes any form of investment advice. The comments are made available purely for educational and marketing purposes and do NOT constitute advice or investment recommendation (and should not be considered as such) and do not in any way constitute an invitation to acquire any financial instrument or product. TIOmarkets and its affiliates and consultants are not liable for any damages that may be caused by individual comments or statements by TIOmarkets analysis and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his/her investment decisions. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances, or needs. The content has not been prepared in accordance with any legal requirements for financial analysis and must, therefore, be viewed by the reader as marketing information. TIOmarkets prohibits duplication or publication without explicit approval.
Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.
Market Opportunities in Focus
Here's a brief overview of last week's key market themes and what you should closely monitor this week. US economy In January 2024, the US ISM Services PMI rose to 53.4 last week, indicatin...
Market Opportunities in Focus
Here's a brief overview of last week's key events and what you should closely monitor over the next few trading days. The US Economy & Jobs Friday’s NFP report showcases the US job market's...
Oil Technical Analysis | Strong Breakout From The Base
Oil Technical Analysis - The oil market rallied strongly last week due to a combination of geopolitical tensions and economic factors. A significant increase in oil prices followed a report o...