Friday preview: Non-farm payrolls and eurozone inflation on tap

Employment indicators are being closely watched by the Fed as policymakers wait for signs of a cooling labour market before they begin to cut interest rates.

"Several participants commented that there were tentative signs of labor market imbalances improving, including declines in job openings and quits over the second half of 2022," minutes from the 13-14 December meeting revealed on Wednesday.

Friday's non-farm payrolls for December are forecast to come in at 170,000, according to the consensus forecast, below the 199,000 reported for November.

However, the ADP Employment Report on Thursday showed a much higher-than-expected increase in private-sector job creation, at 164,000 compared with the 115,000 estimate, raising some concerns of an upside surprise to the government's official figure.

Nevertheless, Kieran Clancy, senior US economist at Pantheon Macroeconomics, highlighted that the ADP report is a "deeply unreliable guide to the official payroll numbers". He explained: "Since the ADP rebuilt its methodology in August 2022, the errors relative to the official private payroll numbers have ranged from an undershoot of 337K, in January 2023, to an overshoot of 348K, last June, with a mean absolute error of 99K."

Meanwhile, jobless claims reported on Thursday fell to a three-month low of 202,000 in the week to 29 December, under the 216,000 forecast.

"Continued claims have stabilised after climbing through much of Q4, although seasonal factors are also making continued claims data harder to interpret," said Nancy Vanden Houten, lead US economist at Oxford Economics. "Nonetheless, we think the continued claims figures are consistent with other indicators showing a softening demand for labor. That should add to the Fed's confidence that inflation is on its way back to its 2% target, allowing the FOMC to begin cutting rates in May."

In other macro news,, 'flash' estimates for eurozone inflation in December will be on tap on Friday and are expected to show that core consumer price growth slowed to 3.4% from 3.6% in November. However, the European Central Bank's preferred measure of inflation, the year-on-year change in the harmonised consumer price index, is tipped to pick up to 3% from 2.4%.

TD Securities analysts explained that base effects from last year's energy subsidies will have likely propelled inflation higher last month, but the impact will only be temporary. "This does not mean inflation is about to break its downward trend – base effects should bring inflation down sharply early next year," they said.

Friday January 05

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Factory Orders (US) (15:00)

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Non-Farm Payrolls (US) (13:30)

Producer Price Index (EU) (10:00)

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