NFP Quick Analysis: American workers, US Dollar celebrate higher wages while stock bulls suffer


  • The US gained 216,000 jobs in December 2023, beating estimates. 
  • Wage growth accelerated to 4.1%, posing a problem for the Federal Reserve. 
  • The robust data lowers the chances of an early rate cut. 
  • Cooling wage growth may cause a rethink in markets once the early 2024 correction subsides.

Recession, what recession? Forecasts for 2023 ranged between subdued and gloomy, but as the last jobs report for the year shows, the level of hiring is consistent with healthy growth, not a downturn. Equity investors desire lower interest rates and worse data – and there is nothing in this report for them. 

Nonfarm Payrolls data for December showed a healthy increase of 216,000, marginally above the pre-pandemic average of just under 200,000. This is healthy growth. Data for the previous two months suffered a downward revision worth 71,000, which is substantial but insufficient to ruin the party for workers.

Laborers further celebrate the surprising increase in Average Hourly Earnings – 0.4% MoM vs. 0.3% expected, and acceleration of yearly wage increases from 4% to 4.1%, smashing estimates of a slide to 3.9%. 

What is good for workers is positive for the US dollar – but not for stock bulls or the Federal Reserve (Fed), which may hold back cutting rates. 

Investors had a rethink about the path of interest rates. In mid-December, the Fed signaled three rate cuts in 2024. From then and through year-end, bond markets got overexcited, pricing five moves, with the first coming in March. 

The new year kicked off with a reveal of the late 2023 trend, with shares coming under pressure on every trading day of 2024. The US Dollar staged a comeback and Gold retreated from the all-time-highs. 

The new data provides more fuel to the 2024 correction by showing that the US labor market remains solid. If more people are working, they can spend more. However, this may only be the short-term story.

Moreover, wage growth is booming, and this is frustrating news for the Fed in its last battles against inflation. The bank focuses on "non-shelter core services" price rises – a mouthful of a term that roughly translates to inflation that is driven by wages. The stubborn rise of wage growth means this "sticky" inflation – wages do not fall fast – is even stickier than thought.

Zooming out, once the dust settles from the current correction in markets, I expect the narrative of rapidly falling inflation to gain more ground, supporting stocks and weighing on the US Dollar. However, it will take a weak inflation report to weigh on the Greenback – and this NFP for December does not provide any proof of falling inflation. Patience is needed. 

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