The first US jobs report of 2021 is unlikely to garner the sort of attention it once did, for investors are still largely ignoring pandemic-hit data as they look forward to more normal times ahead. That said, there will come a time when economic data will be important again as central banks decide whether to tighten their respective policies again once the recovery starts to take shape, hopefully in the not-too-distant future. In fact, judging by the recent price action on longer-dated US bonds, with 10-year yields spiking to levels not seen since March, it looks like investors are beginning to look ahead and expecting longer-term interest rates to rise. This is why the US dollar has managed to find a bit of support over the past couple of days, and why precious metals have struggled this morning. Friday’s jobs report may provide a reality check of the current situation.
- Non-Farm Employment Change: 68K vs. 245K in November
- Unemployment Rate: 6.8% vs. 6.7% last
- Average Hourly Earnings +0.2% m/m vs. +0.3% previously
Pre NFP leading indicators:
- ADP payrolls: -123K vs. +60K expected and 304K last
- Employment component ISM manufacturing PMI: 51.5, up 3.1 points from 48.4 in Nov
- Employment component of ISM services PMI 48.2, down 3.3points from 51.5 in Nov
With the ADP coming in sharply lower than expected, and given the mixed ISM employment PMI components, don’t be surprised if the December jobs report comes in below expectations. But what I am more interested in as far as this report is concerned is to see whether the markets actually care about jobs again or will it be ignored again. If we do see a sharp reaction, then this would suggest to me that investors are actually looking at data again and are adjusting their expectations accordingly.
For that reason, it is worth keeping a close eye on bond yields, which as mentioned, have been rising over the past few days:
Source: ThinkMarkets and TradingView.com
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