07 January 2024
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US nonfarm payrolls better than expected in December

Daily Outlook - 8 January 2024

By Edward Bell

The US labour market added more jobs than expected in December with nonfarm payrolls rising by 216k compared with market expectations for 175k. The estimates for both November and December were revised lower, making the December reading the strongest of the last three months. The unemployment rate was flat at 3.7% thanks to drops in both the household survey and the labour force for December while average hourly earnings rose by 0.4% m/m. Overall, the December jobs report gave some welcome developments with job gains spread across multiple sectors but there were also some signs of cooling activity, particularly the drop in the labour force. The number of hours worked also dropped marginally. On balance, we don’t expect that the labour market data will be the main determinant for the Federal Reserve on policy in the next several months and this week’s release of US CPI will be much more critical.

The US ISM services index dropped in December to 50.6, just above the level delineating expansion from contraction. The employment subcomponent in the index also dropped sharply, down to 43.3 which was its worst print since the peak of the pandemic in mid-2020. The number of sectors reporting expansion was balanced by those contracting in December while prices paid dropped to a still high 57.4.

Eurozone inflation accelerated in December to 2.9% y/y from 2.4% a month earlier. The principal cause of the increase in inflation was energy prices thanks to a low base effect from December 2022 when prices had declined. Food prices, however, dropped as did core inflation which slowed to 3.4% from 3.6% a month earlier. ECB officials have cautioned that inflation could pick up in the near term and that would warrant them keeping rates elevated for some time.

Today’s Economic Data and Events

  • 11:00 GE factory orders m/m Nov
  • 14:00 EC retail sales m/m Nov

Fixed Income

  • Economic data out at the end of the week caused some whipsaw moves in US Treasury markets as an initial rally on the back of the strong than expected headline nonfarm payrolls number was later offset by a disappointing ISM service report. Yields on the 2yr closed near unchanged at 4.3807% while the 10yr yield added about 5bps to 4.0457%, its first close above 4% for 2024.
  • European bond markets also sold off with gilt yields up 6bps and bund yields adding 3bps to 2.154%.
  • Emerging market bonds dropped at the end of the week with a broad USD index down about 0.2%. Regional credit was also softer with a GCC wide benchmark index off by 0.3%.


  • Currency markets had a choppy end to the week, buffeted and buttressed by US economic data which flashed hot and cold. EURUSD closed Friday unchanged at 1.0943 along with JPY which settled flat at 144.63. Sterling was a relative outperformer with a gain of 0.3% to 1.272. For the first week of 2024, the dollar index rose 1%, its first weekly gain since early December.
  • Commodity currencies showed a more mixed performance with USDCAD rising by 0.1% to 1.3363 while AUDUSD managed to increase by 0.1% to 0.6713 and NZDUSD added slightly more than 0.1% to 0.6244.


  • Equity markets ended the first week of the year on a soft footing as a softer growth outlook along with an uncertain time frame for easing monetary policy weighs on sentiment. The S&P closed the week down 1.5%, its first weekly decline since the end of October, and was paired with drops in both the Dow and NASDAQ. European markets also closed weaker with the FTSE 100 down 0.6% and the EuroStoxx off by 1.3%.
  • Asian markets also sank in the first trading week with the Nikkei down 0.3% and much wider losses in the Hang Seng and Shanghai Composite.
  • In local markets the DFM closed Friday flat while the ADX was up by 0.2%.


  • Oil prices capped a choppy week with gains on Friday helping to give both Brent and WTI a positive start to the year. Brent futures added 1.5% on Friday to close at USD 78.76/b while WTI added more than 2.2% to settle at USD 73.81/b. Geopolitical anxiety over security of supply as well as disruptions to Libya’s supply are weighing against softening demand conditions.
  • Industrial metals closed weaker on Friday with LME aluminium down 0.3% to USD 2,273/tonne and copper showing a downward bias at USD 8,463/tonne. Iron ore futures also dropped, down 1.4% to USD 140/tonne but still managed a decent 2.9% weekly gain.
  • Precious metals have all started the year on a softer footing with gold prices down 0.9% last week and larger negative moves in silver, palladium and platinum.

Written By

Edward Bell Head of Market Economics

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