Friday’s official jobs report is expected to shed light on the cooling U.S. labor market in December 2024, as economists project slower hiring that could ease pressure on the Federal Reserve amid renewed inflation concerns and policy uncertainty under Donald Trump‘s incoming administration.

In a preview shared Wednesday, ADP's National Employment Report—a private-sector-focused indicator—revealed that employers added 122,000 jobs in December, marking a drop from November’s 146,000 and coming in below expectations.

Nela Richardson, ADP's chief economist, said: “The labor market downshifted to a more modest pace of growth in the final month of 2024, with a slowdown in both hiring and pay gains. Health care stood out, creating more jobs than any other sector.”

What To Expect: Nonfarm Payrolls, Unemployment, Wages

The consensus among economists – as tracked by TradingEconomics – is that nonfarm payrolls will show a net gain of 154,000 jobs in December, down sharply from the 227,000 added in November.

Such a slowdown would reflect a labor market losing steam, as monthly payroll growth has averaged 140,000 over the past six months, compared to 220,000 earlier in 2024.

The unemployment rate is forecast to remain unchanged at 4.2%, while average hourly earnings are expected to rise 0.3% month-over-month, a deceleration from the 0.4% growth seen in November.

On a yearly basis, wage growth is projected to hold at 4%, a sign that wage pressures are cooling after months of post-pandemic labor shortages.

Implications For Markets And The Fed

A weaker-than-expected jobs report on Friday could bolster U.S. stocks, weaken the dollar, and lower government bond yields, as investors may interpret it as a signal that the Fed has room to ease monetary policy further.

On the flip side, stronger-than-expected job creation or lower unemployment could spur fears of a resilient labor market, which might delay the Fed’s easing timeline.

Wells Fargo analysts said they anticipate a return to trend-like payroll growth in December, highlighting that worker participation has softened slightly, with prime-age participation leveling off—a further indication of cooling labor demand.

Bank of America projects a 175,000 increase in December payrolls, slightly above consensus. Yet, economists at the investment bank indicate the jobs market is "normalizing," with moderating wage growth and low jobless claims suggesting an orderly slowdown.

“Our base case is that further modest labor market weakness will push the Fed to cut twice more, in March and June,” Bank of America’s economist Stephen Juneau said in a note.

Uncertainty over the Federal Reserve’s policy path in 2025 remains elevated, with markets pricing in just 40 basis points of cumulative rate cuts by year-end—equivalent to only one fully priced interest rate reduction.

The stakes are high, as Treasury yields have recently surged to their highest levels in over a year, with the 30-year yield approaching the critical 5% threshold. All eyes now turn to Friday’s jobs report, set for release at 8:30 a.m. ET.

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