The US non-farm payrolls data for December 2024 is set to be released at 1.30pm (UK time) on Friday 10 January. The CME S&P 500 mini options market is pricing in a move of over 90 points (1.5%), potentially increasing volatility and breaking the index out of its recent triangle pattern.
Strong labour market and high interest rates
The Thomson Reuters market consensus expects a reading of 160,000 payrolls, down from 227,000 in November, while the unemployment rate is expected to remain steady at 4.2%, and average hourly earnings are expected to continue to rise at an annualised rate of 4%.
If these estimates are correct, tomorrow’s report could indicate a strong labour market: full employment, steady job growth and rising incomes, a combination that could point to potential inflationary pressures.
A paradoxical impact on stock markets
The US economy’s strength (the Atlanta Federal Reserve’s latest GDP Now estimates 2.7% GDP growth in Q4 2024), increasing inflationary pressures (with ISM services at 64.4 in December 2024) and possible Trump policies have prompted the Fed to adopt a stricter monetary policy stance, as reflected in the latest Federal Open Market Committee minutes. This has driven a sharp rise in US interest rates, with 10-year notes reaching 4.70% and T-Bonds around 4.90%, levels not seen in recent months.
High interest rates and a strong US dollar are weighing on stock markets, which are paradoxically reacting negatively to positive economic data. In this context, stronger-than-expected employment data could hurt stocks if rates continue to rise, while weaker data might boost markets if rates ease.
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