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Market Update

U.S. jobs market remains strong, nonfarm payrolls data suggest slowing inflation

Date:
January 9, 2023
  • Luke Borda headshot

    Authors

    Luke Borda

    Client Relationship Management

    Corporates | Kennett Square, PA

Summary

December payrolls surpassed expectations Friday morning as the U.S. added 223,000 jobs to the economy. While the labor market remains strong, investors noted that wage inflation appears to be easing. On the commodity front, oil and natural gas markets lagged to start the year due to global demand concerns and increased supply.

U.S. adds 223,000 jobs in December; the labor market remains resilient while showing signs of a slowdown

A critical U.S. nonfarm payrolls report was released on Friday with the U.S. adding 223,000 jobs to an already-resilient labor market and easily beating consensus estimates of 200,000. While December hiring slightly declined from November’s 256,000 jobs added, the unemployment rate fell to 3.5% and capped off the second-best year for American job creation in history. The U.S. 10Y note fell below 3.7%, a two-week low, on the news.

Notably, the report showed that wage inflation slowed in December, helping to ease market concerns around the Fed’s hawkish stance and that a peak Fed Funds rate may be on the horizon. Policymakers have made it clear that the central bank will keep key lending rates restrictive until there are “clear signs” inflation is truly easing.

Last month’s data also indicates that the labor market remains stubbornly tight, even as many corporates across certain industries, particularly across technology and finance, begin to lay off portions of their pandemic-era-bolstered workforces.

Global demand concerns pressure energy markets

Energy commodities lagged to begin 2023 trading with WTI crude bottoming at $72.7/bbl and U.S. natural gas falling below $3.8/MMBtu. Last week’s shutdown of a key U.S. fuel pipeline for unscheduled maintenance forced investors to reposition in the market, while a recent surge in COVID cases across China, the world’s top crude importer, sparked demand concerns overseas. In the U.S., heightened concerns of a Federal Reserve-induced recession also placed downward pressure on prices. U.S .natural gas markets also weakened, falling to their lowest levels in a year following smaller-than-expected storage draws from domestic utilities.

The week ahead

Markets will brace for an important week of data and earnings. On Thursday, the ever-important year-over-year consumer price index (CPI) will be published for December, which will provide insight into whether the Fed’s aggressive tightening cycle is achieving its objective of lowering U.S. inflation.

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Disclaimers

Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit chathamfinancial.com/legal-notices.

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