- Job creation forecast to drop to 71,000 in December from 245,000.
- Unemployment expected to rise 0.1% to 6.8%.
- Initial jobless claims averaged 833,000 in December from 740,000 prior.
- Hiring under threat from California lockdown and pandemic caseload.
- Weak employment production has kept the dollar defensive.
American employers likely pulled back on hiring in December as the strict lockdown and burgeoning pandemic caseload in California, the nation's largest economy, invoked caution even as the business community is planning for the eventual economic revival.
Nonfarm Payrolls (NFP), the best known statistic of the Labor Department's Employment Situation Report, is forecast to add 71.000 jobs in December, less than half the 245,000 increase in November. If the prediction is accurate job creation will have collapsed 89% in four months from a 661,000 average in September and October.
Unemployment is expected to add 0.1% to 6.8% and the underemployment rate, which includes jobs searchers across 12 months, is predicted to be stable at 12%. Average Hourly Earnings are projected to rise 0.2% on the month and 4.4% on the year. Average Weekly Hours should remain at 34.8%.
Initial Jobless Claims
Last March claims were the first hint of the economic catastrophe that awaited the lockdown orders. Their inference remains as strong now as then.
The rise in claims in the middle two week of November, even though bracketed by the lowest numbers of the pandemic and the lowest monthly average at 740,000, presaged the month's almost two-thirds drop in payrolls to 245,000. The increase of 97,000 in the December average to 833,000 and its continuation with the first January forecast of 833,000 is a warning that job creation may be shuddering to a halt.
Initial Jobless Claims
Employment numbers from the private payroll company Automatic Data Processing (ADP) were negative for the first time since April in December, shedding 123,000 positions, a 211,000 miss on the 88,000 forecast and a 427,000 swing from the November result.
ADP Employment Change
Manufacturing Purchasing Managers' Indexes
Surprisingly, considering the pandemic developments, attitudes among manufacturing executives improved in December. Economists had expected optimism to fade as the economy still seems to be months from full revival. Instead, every index beat its forecast and improved on the November score.
The headline index which rates business conditions in the entire sector jumped to 60.7 from 57.5 in November, far ahead of the 56.6 prediction. Scores above 60 are extremely rare. In the past 35 years, 420 months, only four results have been higher, 60.8 in August 2018, 61.4 in May 2004, 60.8 in January 2004 and 61.0 in December 1987.
The Employment Index increased modestly to 51.5 in December from 48.4, also better than its 50.5 forecast. But except for October's 53.2 reading, it was the highest level since July 2019.
Finally the New Orders Index, a much-followed gauge of future business, rose to 67.9 from 65.1, matching the October score and the highest level in 16 years.
A positive outlook among manufacturing executives stems from the exceptionally strong flow of new business to their firms.
This robust order stream jibes with the economic activity estimate from the Atlanta Fed GDPNow model which posits an 8.9% annualized pace in the fourth quarter.
There is an unusual disconnect between the near and far term views of the US economy. The labor market reflects the reality of lockdowns, restricted businesses and socialization and the purchasing managers limn the economic recovery that is expected to flower once the pandemic is forced to retreat.
For the moment the dollar is insuperable from the US labor market. December's greenback decline was largely due to the worsening claims and payroll numbers. There is unlikely to be any good news for the US currency in Friday's payroll release.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.