Synopsis:

BofA forecasts a 175k rise in nonfarm payrolls and an unchanged unemployment rate of 4.2% in December. A stable labor market could influence the Fed’s rate cut trajectory.

Key Points:

• Payrolls:

  • Expected increase of 175k, above the 153k consensus.
  • Jobless claims during the survey week remained low (220k), similar to November (215k).
  • Softer job growth anticipated compared to November's 227k due to payback for October hurricane disruptions.

• Unemployment Rate:

  • Predicted to hold steady at 4.2%, with some payback expected in the Household survey after two weak months.
  • November’s unemployment rate was on the cusp of rounding up to 4.3% (4.246%).

• Fed Implications:

  • December’s hawkish FOMC meeting underscored a pause in January as the base case.
  • A jobs report close to forecasts would support the pause, with risks that the cutting cycle could end if the labor market stabilizes.
  • BofA maintains a base case of two more 25bp cuts in March and June but notes data-dependent risks to this view.

Conclusion:

The December jobs report is expected to show steady growth and stabilization in unemployment. If realized, these trends could limit the Fed’s scope for further easing in 2025.