Non Farm Payrolls Preview | Employment trends and Fed policy outlook

BY Janne Muta

|January 5, 2024

NFP Preview Report - For today's Non-Farm Employment Change, analysts are expecting a figure of 168K, which is slightly lower than the previous 199K. Regarding the Unemployment Rate, expectations are set at 3.8%, showing a slight increase from the prior rate of 3.7%. Let’s study the recent employment data to better understand how the US employment trends are developing and their likely impact on Fed policy.

Positive ISM Services PMI

December's S&P Global US Services PMI marked a five-month high at 51.4, showcasing service sector growth amidst manufacturing declines. Increased sales in services contrasted with goods producers' business downturn. Employment saw modest gains, input costs surged, and selling price inflation eased.

Softening US Job Market

US job openings in November dipped to 8.79 million, the lowest since March 2021, reflecting a cooling labour market. This third consecutive monthly decline was below forecasts, signalling easing conditions in the job market.

Resilient US Private Sector Employment

US private sector employment in December 2023 reported a significant addition of 164K jobs, surpassing expectations. Leisure and hospitality led with 59K new jobs, but manufacturing, information services, and mining saw job losses. Wage growth varied between job-stayers and job changers.

Decreasing US Unemployment Claims

US unemployment claims declined to 202K in the final week of 2023, the lowest since October, bettering predictions. This decline, along with the drop in continuing claims to 1.885 million, suggests an easing yet robust job market.


Despite a decrease in job openings to 8.79 million in November 2023, a low since early 2021 signalling a cooler labour market and economic deceleration, the significant gain of 164K private sector jobs in December 2023, exceeding expectations, still indicates a strong demand for labour.

Concurrently, the deceleration in wage growth suggests a more stable wage-price relationship, potentially reducing inflationary pressures, a key consideration for the Federal Reserve's balance between supporting employment growth and curbing inflation.

The end of 2023 saw low unemployment claims, further highlighting a tight labour market. Although some sectors like manufacturing and mining are shedding jobs, the overall job market remains resilient. This resilience, combined with moderate wage growth and controlled inflation, offers a cautiously optimistic view of the US economy as it progresses into 2024, maintaining stability amidst challenges.

In summary, the combination of a cooling labour market, stable wage growth, strong job creation, and controlled inflation point towards a scenario where the Federal Reserve might lean towards a less hawkish approach, focusing on nurturing economic growth while cautiously monitoring inflation trends.

A slight increase in the unemployment rate as expected by the analyst consensus, and the broader economic indicators suggesting a potentially less hawkish Federal Reserve, the US dollar could be under pressure if the trends in the US employment market persist.

Potential Scenarios

  • Strong Employment Data: Surpassing 168K NFP and a lower unemployment rate may delay Fed rate cuts, strengthening the dollar and potentially dampening risk sentiment.
  • Weak Employment Data: Falling short of 168K NFP or a higher unemployment rate could confirm the need for Fed rate cuts, likely weakening the dollar and boosting risky assets.

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Janne Muta

Janne Muta is a seasoned market analyst and trading educator with a M.Sc. in Finance. His strategies integrate macroeconomics with technical analysis and he shares his knowledge with the trading community.

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