On the December Jobs Report

Payrolls grew 50,000, below the 70,000 consensus, and far below our model’s estimate for 114,000. The “household survey” data was far more optimistic, driving the unemployment rate lower. Sharp revisions to October make an already bad month worse, but doesn’t create a new month in 2025 in which payrolls contracted. Nevertheless, September stands as the highwater mark. Computer programmer payrolls contracted by 3,900, pointing to the leading edge of AI-driven labor disruptions. The sharp decline in immigrant population and employment has stopped now for four months, and is very slightly reversing itself. We continue to see that as the key labor market dynamic, and think its stabilization points to less volatile jobs reports in the future, built around a dial-tone of about 75,000 payrolls. The Fed gets nothing new from this report. Market-based expectations for the funds rate didn’t change, and we are still calling for 2-7/8% at year-end.