December Private Sector Payrolls Show Decline in Job Growth

Pre-market futures have shown some fluctuations with the release of new labor market data before the stock market opens. Initially, futures were slightly negative, but then turned positive based on the economic news. However, they have returned to a downward trend, with the Dow down by 15 points, the S&P down by 5 points, and the Nasdaq down by 25 points. Additionally, ten-year bond yields have surpassed 4.7%, resulting in the widest spread between ten-year and two-year yields seen in recent years.

ADP Private-Sector Payrolls Lower than Anticipated

The job figures released today by Automatic Data Processing (ADP) show that there were +122,000 new jobs in the private sector in December. This number is below the expected +136,000 and also lower than the unrevised +146,000 from the previous month. This represents the lowest level of private-sector job growth since August of the previous year.

As anticipated, job growth in the Services sector significantly outpaced that in Goods-producing sectors, with +112,000 jobs versus +10,000, respectively. Large firms with over 500 employees contributed the most, adding +97,000 jobs, while medium-sized companies (50-499 employees) added +9,000, and small businesses increased by +5,000.

When breaking down the job growth by industry, Education and Healthcare combined generated +57,000 jobs, while Construction followed with +27,000. The Leisure and Hospitality sector saw an increase of +22,000 jobs in December. The era when hospitality was a driving force in labor market recovery post-COVID seems to have passed, and recent trends continue to reflect this change. Meanwhile, Manufacturing lost -11,000 jobs last month, indicating ongoing recessionary trends in the domestic goods sector.

One unique metric provided by ADP relates to wage growth among Job Stayers versus Job Changers. This measure has been available for only about five years, and it shows a concerning trend: Job Stayers experienced a +4.6% wage growth, while Job Changers saw +7.1% growth. These figures suggest we are witnessing a general cooling of the labor market.

Weekly Jobless Claims Report Released Early

With tomorrow's market closure in honor of former President Jimmy Carter, the release of the Weekly Jobless Claims report has been moved ahead by one day. The latest report shows that Initial Jobless Claims came in at +201,000, which is below the anticipated +215,000 and last week’s unrevised figure of +211,000. This represents the lowest number of new jobless claims for a single week since mid-February of last year. However, some of this decline may stem from seasonal adjustments, indicating that we could see revisions to this number as the year progresses.

Continuing Claims have risen to 1.867 million, compared to the prior week's 1.834 million. Still, these numbers remain comfortably below the 1.9 million mark, which has been breached a couple of times over the past two months. Despite this uptick, employers are not likely to push the workforce towards higher claims at this point.

Looking Ahead to Stock Market Reactions

Current news headlines are also focused on the dangerous wildfires erupting near Los Angeles, which could have immediate economic implications in the near to medium term. This afternoon, the market will await the release of the minutes from the latest Federal Open Market Committee (FOMC) meeting, where a reduction of 25 basis points (bps) to the Fed funds rate was decided, lowering it to a range between +4.25% and +4.50%. This is a significant decrease of 100 bps from one year ago. While it remains uncertain how much insight these minutes will provide, they could offer surprises in either direction.

jobs, economy, markets