The US non-farm payroll (NFP) for December-2023 (to be released on 05 January 2024) is expected to show a payroll addition of 174,000, slightly above the consensus expectation of 170,000 but below the November 2023 reading of 199,000, a fall of 12% month-on-month, according to GlobalData, a leading data and analytics company.

GlobalData’s US Active Jobs change index, derived from high frequency company job postings dataset available in near real-time has over 70% correlation with NFP data, shows weakening signs for December. GlobalData’s proprietary NFP nowcasting model uses in-house jobs dataset to forecast NFP numbers.

Adarsh Jain, CFA, Director of Financial Markets at GlobalData, comments: “Consistent with the weakness observed in the US job openings (JOLTS) data in recent months, NFP numbers are slowing down, with an average monthly payroll additions of 350,000 during the second half of 2023, compared with 445,000 in the first half of 2023. This decline is driven by slower new job postings by companies, which is a lead indicator of payroll additions in future months. GlobalData expects this trend to continue, driven by elevated interest rates impacting business and consumer sentiment, as well as companies implementing generative AI capabilities across their business to improve productivity – getting more done with fewer resources.”

In December, technology sector showed healthy addition to payroll with highest job closure growth rate. However, its slowdown in job postings indicates that its future job additions in ensuing months will be slower, which will weigh on the overall NFP given its large share.

Jain concludes: “Fed will take comfort in cooling non-farm payroll numbers, a sign of validation that its rate increases have worked and the current stance of pause in rates and possible cuts later in 2024 is all but assured.”