A Goldilocks jobs report

Unemployment stays low

A remarkable trifecta of good news in the US payrolls report.

Jobs growth continued, with nonfarm payrolls increasing by +223,000 in December (though revisions to previous months knocked -28,000 away from the headline figure). 

There's been plenty of banter about whether the US economy is in recession, yet the unemployment rate ticked back down from 3.7 per cent to 3.5 per cent...so, clearly not. 

Paradoxically, perhaps the most heartening part of the release was that growth in average hourly earnings continued to decline. dropping from a recent high of 5.6 per cent in March, to 4.8 per cent in October, and now down to 4.59 per cent in December. 

Growth in earnings in the month of December was just 0.27 per cent - and the annual result far lower than the market expectations of 5 per cent - notching the slowest year-on-year growth since August 2021. 

This isn't the 1970s, and there's evidently no risk of a wages price spiral here. 

Overall, given the important of the wages figures, this is a 'risk on' signal for markets. 

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If you wanted to take a more pessimistic view, then the ISM survey did show a dramatic drop in new orders. 

Thus although inflation is likely going into freefall this year, there may still remain a risk of a 'hard landing' for the US economy. 

Bond yields dropped on the news, with US 2-year Treasuries down by 20 basis points to 4.25 per cent.