Diving into 2023

MACRO MARKETS 

Payrolls on Deck

This Friday January 6 at 8:30am EST Non Farm Payrolls are projected to be above 200K in December. This is a huge event that will dictate much of what will happen in Q1 and in January and February. Although this shows a pace of slowing down and employment trending lower it is still a very strong number and a very robust labor market overall.

Following Fed Chair Powell’s hawkish pushback in December, investors are likely to be sensitive to continued strength in the jobs data and they will also be paying attention to average hourly earnings, which accelerated to 5.1% year-on-year in November.

Should Friday’s NFP report beat expectations again, there could be some relief for the markets from the ISM manufacturing and non-manufacturing PMIs due on Wednesday and Friday. Both are expected to print lower in December, with the former sinking deeper below 50.

Wage growth is extremely important as rates directly impact the market. Economists are expecting average hourly earnings rising 5% in December from a year ago, which is a good proxy of inflation. The expected unemployment rate is 3.7%. This is obviously quite low if inflation and wage growth needs to come down. As mentioned previously, we expect a 5% unemployment rate to mark the generational bottom of this bear market.