December US job growth: the gift that keeps on giving

For the December employment report, scheduled for release on Friday, January 8, nonfarm payrolls are expected to have risen by 225k. Within this, private payrolls are expected to have expanded by 215k and government payrolls to have grown 10k. Initial jobless claims were nearly unchanged from the November to December reference week (271k versus 270k). While continuing unemployment claims are currently higher than one month ago, it is believed that this uptick reflects seasonal volatility. The unemployment rate is expected to fall one-tenth to 4.9% (previous: 5.046%), and average hourly earnings to rise 0.2% m/m (2.8% y/y). Finally, expect a steady workweek at 34.5 hours.

"On balance, we view payroll growth as back in line with its underlying trend of 200-225k", says Barclays.

A similar rate of job growth over the next few quarters should push the unemployment rate lower and lead to further tightening in labor markets, keeping the Fed on course for a gradual pace of tightening of about 75bp in rate increases per year.