US Jobs Report to Offer Clues on Macro OutlookUSJobsReporttoOfferCluesonMacroOutlook

Investors will get a fresh glimpse at the state of hiring in the US when the Labor Department publishes its December jobs report on Friday. The labor market maintained its footing through a period of rampant inflation and rising interest rates, reflecting broader resilience across the economy. The pace of hiring has slowed of late, and a weakening labor picture could give the Federal Reserve more ammunition to dial back its tightening campaign. However, the unemployment rate has held below 4%, and continued jobs growth could have the effect of sustaining elevated levels of inflation and encouraging officials to move more slowly before cutting rates. Private-sector employment increased by 164,000 jobs last month, the highest mark since August, payroll processor ADP reported on Thursday. Economists have forecast that employers created 170,000 new jobs overall in December, down from 199,000 the month before, with the unemployment rate ticking up to 3.8% from 3.7%.

A murkier economic outlook and inflation’s downward trajectory have fueled expectations that rate cuts are on the horizon, underpinning a strong finish for equity and bond markets in 2023. Market participants are looking for the Federal Reserve to deliver six quarter-point rate cuts this year, with the first cut coming as early as March, according to CME Group’s FedWatch Tool. A new paper from PGIM Fixed Income examines the historical relationship between monetary policy and economic performance, the factors that reduced the economy’s sensitivity to rates in the current cycle, and the impact of higher rates going forward.