The anticipation is palpable as Wall Street braces for the final non-farm payroll report of 2024, set to be released this eveningWith economic analysts buzzing with predictions, the consensus points toward a "moderate" cooling in December's employment figuresThis development underscores the ongoing robustness of the U.Sjob market and strengthens expectations for the Federal Reserve to adopt a more cautious approach towards interest rate cuts.

Scheduled for release at 9:30 p.mBeijing time, the non-farm employment report from the U.SBureau of Labor Statistics (BLS) has Wall Street buzzing with a variety of coordinated expectations:

The anticipated number of non-farm jobs added stands at 165,000. This figure, while lower than the previous month's monumental gain of 227,000, shows a cooling compared to the three-month average of 173,000 and the one-year average of 190,000. However, when juxtaposed against the six-month average of 143,000, a slight uptick can be seen.

As for unemployment, predictions indicate a steady rate of 4.2%, consistent with recent data

The Federal Reserve's latest economic projections even forecast unemployment may rise to 4.3% by the end of 2025, although the long-term outlook remains steady at 4.2%.

In terms of wage growth, the average hourly earnings are expected to mirror last year's increase of 4.0% year-on-yearMonth-over-month, a rise of 0.3% is anticipated, albeit lower than the previous month’s hike of 0.4%.

Contrastingly, major financial institutions like Goldman Sachs and Citigroup have painted a more pessimistic pictureGoldman predicts that December may see a mere addition of 125,000 jobs, attributing significant seasonal headwinds that may reduce employment figures by around 50,000. Citigroup’s outlook calls for even lower numbers, with an estimate of just 120,000 new jobs and an unemployment rate hitting 4.4%. These forecasts serve as a stark reminder of the labor market's ongoing softness and fragility.

This final non-farm payroll report for 2024 holds considerable significance

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Should the actual figures align with the consensus expectations, it would imply that the United States created 2.1 million jobs throughout the year— a decline from 3 million created in 2023, yet still exceeding the 2 million jobs recorded in 2019. The implications of this report stretch beyond mere statistics, impacting monetary policy and economic perceptions across the board.

Banks such as Bank of America are indicating that the December data could play a pivotal role in shaping monetary policy decisions, particularly in determining whether the Federal Reserve will pause rate cuts in JanuaryFollowing a considerable hawkish shift at the December FOMC meeting, analysts suggest that January’s pause could be the baseline scenario, especially if employment figures closely match predictions.

Despite the prevailing doom and gloom from certain quarters, even pessimistic forecasters like Goldman Sachs believe that drastic re-pricing in the markets is unlikely

Federal Reserve officials appear unperturbed regarding the labor market, viewing ongoing trends as an indication of a gradual and stable cooling.

As for the general outlook, the labor market seems set to revert to what was considered normal before recent data distortionsAccording to Bank of America, the November figures, which included offsets for disruptions caused by hurricanes and strikes—particularly in the transportation equipment manufacturing sector—mean December’s job growth will likely be below November's impressive tally.

Analysts from Nomura anticipate that sectors such as retail and construction will play more significant roles in December's employment increaseNovember saw a reduction of 28,000 jobs in retail largely due to seasonal adjustments for the holiday period, while a slowdown in construction output in recent months, exacerbated by hurricane impacts, could reverse in December as these sectors rebound.

The unemployment rate remains an essential indicator, particularly given the uptick observed at the start of 2024, where consecutive rises have highlighted a common recession marker

Predictions indicate this rate will stabilize at 4.2% by the end of the year, unchanged from November but up from an initial 3.7% earlier this year.

Compensation trends are also garnering attention, especially following a surprising uptick in hourly wages in NovemberAnalysts are keenly observing whether this trend will continue or normalize, as even a slightly better-than-expected wages report could stir concerns regarding wage acceleration, potentially constraining future rate cuts by the Federal Reserve.

Prior to the release of the non-farm report, several coincident indicators offer valuable insightsWeekly unemployment claims saw first-time applications rise to 220,000, while the number of continuing claims remained stable at 1.897 millionMeanwhile, the "mini non-farm" ADP report indicated that 122,000 new jobs were created in December, a number that fell short of the forecasted 140,000 and marked the lowest level since August

Meanwhile, notable increases in JOLTS (Job Openings and Labor Turnover Survey) vacancy numbers hint at labor market dynamism still in play despite challenges ahead.

The stability of the U.Semployment market has cultivated a wave of optimism among several Federal Reserve officials, who have expressed confidence that the gradual cooling is not alarmingThis perspective aligns with expectations for the Fed to moderate its pace of interest rate cuts.

Federal Reserve Chairman Jerome Powell has previously emphasized that as long as the economy and job market demonstrate resilience, he can afford to adopt a cautious stance regarding further rate cutsCurrent market anticipations suggest that a rate cut is not in the cards for the Federal Reserve's upcoming January 29 policy meetingEstimates suggest that about 40 basis points of rate cuts could materialize by 2025, implying that a solitary cut has already been integrated into market expectations, with a second cut standing at around 60% probability.

Officials, including Powell, have reiterated that the job market is decelerating without raising alarms

Likewise, other officials have echoed this sentimentNotably, Fed member Daly has commented that businesses indicate they can find workers, and that workers, in turn, can find jobs, reflecting a crucial balance that the Fed aims to maintainFederal Reserve official Waller, too, sees no indicators of imminent dramatic deterioration in the labor market over the coming months.

The sentiment from Bank of America suggests that the December figures might solidify the case for a rate pause in JanuaryWith December’s employment data pivotal to this movemen, many watchers are aligned with this viewpointThey maintain the scenario that two additional 25 basis point cuts may occur in March and June, while future easing will hinge on upcoming data shifts.

Nomura's analysis also aligns with the likelihood that the Federal Reserve may maintain its hawkish stance stemming from the December meeting, emphasizing that robust employment growth and stability in the unemployment rate will yield caution when deliberating future rate cuts

With governmental changes approaching, especially concerning policy shifts potentially stemming from tariffs and inflation pressures, monetary policy adjustments may become heavily influenced by evolving economic landscapes in 2024.

The health of the employment market not only supports the Fed's shift towards a careful easing of policies but also implies that rate cuts will only be small—a projection of a minor 25 basis point decrease in 2025, followed by a pause in easing until 2026.

Turning attention to stock markets and the USD, there’s rising speculation regarding the dollar's trajectory post the anticipated jobs reportFollowing a robust appreciation, UBS indicates a crucial decision point for the dollar, with the non-farm report likely serving as a key catalyst for its next movementsA significant negative surprise in job growth—registering under 100,000—could lead to an immediate weakening of the dollar, while an uptick in unemployment rate to at least 4.4% further weighs heavily on its value.

Alan Stewart from EMEA EMFX trading suggests that should the job figures fall drastically short of expectations, a brief relief rally among emerging market currencies may occur, albeit without lasting impact