Upcoming Macroeconomic Data Market Friendly?

The stock market may very well move move up in the next week or two, as the macroeconomic data are expected to be market friendly.  The key data are seen showing moderate growth and inflation, a good combination now that the Fed is likely to be on hold for awhile.  Market caution may reassert itself as the Presidential inauguration on January 20 gets closer.

Consensus expects a near-trend December Employment Report.  Nonfarm Payrolls are seen rising 150k m/m and the Unemployment Rate steady at 4.2%.  A near-consensus increase would be between the 3-month average ( 173k) and the October-November average (132k).  (Note that October and November were impacted by strikes and bad weather, which should be cancelled out when the two months' jobs gains are averaged.)  An uptick in the Unemployment Rate can't be ruled out, as the Rate rounded down from 4.245% in November -- "noise" in the data could push the headline print up to 4.3%.  Consensus looks for a return to 0.3% m/m in Average Hourly Earnings.  This would be a favorable print for the markets and Fed, after AHE averaged 0.4% in the prior 4 months.

The November JOLTS data are expected by consensus to show a dip in Job Openings, with the Total being close to pre-pandemic levels.  A dip would indicate some softening in demand for labor.  It will be interesting to see if Hires soften, as well.  Continuing Unemployment Claims have hinted as such in recent weeks, adjusting roughly for holiday effects.

Last week's release of the December Mfg ISM offered evidence of moderate economic growth.  The 49.3 print is in line with a gradual (albeit uneven) improving trend since July.  It exceeded both the Q424 average (48.1) and the Q324 average (47.1).  This kind of gradual improvement should be market friendly (for both stocks and bonds), assuming the Fed is on hold.  Moderate growth is good for the profit outlook while still being non-inflationary.  The Mfg ISM Survey results do not call for tighter monetary policy. 

Indeed, the Atlanta Fed model's latest estimate of Q424 Real GDP Growth is 2.4% (q/q, saar), which, if correct, should keep Fed's policy intentions unchanged -- that is, keeping open the door for modest easing next year.  This pace is just above the longer-term trend estimated by the Fed.  It would put the 2024 (Q4/Q4) growth rate at 2.5%, matching the Fed's Central Tendency Forecast.  It should give the Fed more confidence in its forecast of 1.8-2.2% in 2025.