December jobs report is expected to show another soft hiring month

The next U.S. jobs report is expected to show hiring stayed weak in December, even if the unemployment rate ticks lower. For everyday investors, the report will offer a fresh read on whether the labor market is cooling further or finding a steadier floor after months of slow job growth.

The Bureau of Labor Statistics is scheduled to release the December employment report on Friday at 8:30 a.m. ET. The consensus forecast calls for 55,000 jobs added and an unemployment rate of 4.5%. In November, the economy added 64,000 jobs and the unemployment rate was 4.6%.

Nonfarm payrolls, often shortened to NFP, measure the monthly change in U.S. jobs outside farming and a few other categories. The unemployment rate measures the share of people in the labor force who are looking for work but do not have a job. Together, they give investors a compact view of labor demand and household employment conditions.

Wall Street sees a modest beat

Goldman Sachs expects payrolls to rise by 70,000 in December, above the 55,000 consensus estimate. Goldman also expects the unemployment rate to fall to 4.5%, matching consensus, and said November’s rise to 4.6% was largely tied to furloughed federal workers during the government shutdown.

BofA also expects a 70,000 gain in December nonfarm payrolls, including 75,000 private-sector jobs. The bank cited low initial jobless claims and a decline in continuing claims since October. BofA said education and health care should remain the main source of payroll growth, while strength in air travel and holiday spending should support leisure and hospitality hiring.

BofA also expects the unemployment rate to fall to 4.5%, saying the November increase was partly affected by shutdown-related distortions. The bank said the worst of the labor-market slowdown is likely behind the economy, while still describing the expected jobs gain as stable rather than strong.

Other labor indicators are mixed

ADP reported that private employers added 41,000 jobs in December, slightly below consensus forecasts. ADP’s report tracks private payrolls, but it has not generally been a reliable guide to the Bureau of Labor Statistics report.

The Institute for Supply Management’s manufacturing employment index rose to 44.9% in December from 44.0% in the prior month. Because ISM employment indexes are diffusion indexes, they measure how many firms report hiring rather than the number of workers added. A reading below 50% points to contraction, suggesting manufacturing job losses in December. ADP reported a loss of 5,000 manufacturing jobs for the month.

The ISM services employment index rose to 52.0% from 48.9%, pointing to job gains in the services sector. A services reading above 50% suggests more firms reported expanding employment than cutting it.

Weekly unemployment claims were nearly unchanged during the survey reference week, with initial claims at 224,000 in December versus 222,000 in November. That suggests layoffs were about the same in both months.

Over the past six months, job gains have averaged 17,000 per month. The ADP data, ISM surveys and unemployment claims all point to December hiring that looks similar to November: positive, but still soft by recent standards.

This story draws on original reporting from Calculated Risk.