Final 2023 Data on Tap for Labor Market, Inflation as 2024 Begins

As 2024 begins, economic data this week will still reflect the last weeks of 2023 with a bevy of reports on the state of the labor market.

Topping the list will be Friday’s employment report from the Labor Department that is expected to show around 170,000 jobs were created. That would be down from November’s 199,000 but in line with predictions for a cooling job market in 2024. The unemployment rate could also tick up from its current 3.7% level.

Wednesday brings a report on job openings for November, and forecasts are for a number close to 8.9 million – an increase from the 8.7 million of October but still in line with a slow return to balance between supply and demand.

Private payroll firm ADP releases its monthly job survey for December on Thursday with 115,000 jobs expected to be added, up from the 103,000 in November.

“With the worst of the impact from recent strike distortions largely behind us, we look for the trend slowdown in the pace of hiring to resume in December with nonfarm payrolls rising 170K, down from 199K in November,” Sam Bullard, managing director and senior economist at Wells Fargo’s corporate and investment banking group, wrote on Sunday. Secondary employment indicator evidence was mixed last month, including employment surveys and initial jobless claims, both pointing to the resumption of the job growth slowdown. Health care services and government look to continue to drive payroll growth.”

“Looking ahead, we expect the pace of job growth to continue to slow over the coming quarters,” Bullard added. “Labor demand is likely to continue to cool, allowing labor market conditions to normalize further, including a slower pace of wage growth which will be supportive to the Fed’s 2% inflation goal.”

Speaking of the Federal Reserve, minutes of the central bank’s December meeting will be released on Wednesday afternoon. Although the Fed held interest rates steady at the meeting, Chairman Jerome Powell’s press conference was seen as dovish by the markets and led to them pricing in a round of rate cuts this year. When the reduction begins is another matter, with economists divided between March and May.

Analysts will parse the minutes for indications of how much uniformity there was among Fed officials for cuts this year and whether there was divergence over the state of the economy or if monetary policy needs loosening this year.

“Inflation in the U.S. has drifted lower driven by falling shelter and goods prices,” said Asawari Sathe, senior U.S. economist at Vanguard. “The decline in goods prices, which had soared so high soon after the COVID-19 pandemic began, has been steady and is largely responsible for the progress we’ve seen in lowering inflation thus far.”But, she added, “Risks to the inflation picture certainly remain. Geopolitical tensions and adverse weather are potential upside risks in the near term, while a recession deeper than we anticipate would likely lower inflation quickly, albeit at the cost of growth. The last mile to 2% inflation will depend most crucially on the labor market and the trajectory of wage growth, which has slowed recently.”

Meanwhile, the price of a barrel of oil rose Tuesday to $78 for the global benchmark Brent crude on reports of the destruction of three boats manned by the Iran-backed Houthi rebels by U.S. naval forces. The Yemeni Houthis have been attacking commercial shipping vessels in the Red Sea, sending drones and other weapons against vessels they believe are carrying oil and other cargoes to and from Israel.