Top of the Morning: December Jobs Report & U.S. macro update
At a Glance
The recent December jobs report hints at a cooling labor market, aligning with expectations of modest economic growth moving into 2026. Per the full note from UBS, while 50,000 jobs were added in December, the overall context reveals that the labor market's strength may be waning after a year of deteriorating nonfarm payroll numbers in 2025. This situation reinforces the traders' view that the Federal Reserve may need to adjust its monetary policy stance as labor market pressures evolve.
Key Takeaways
- 01December jobs report shows a gain of 50,000 jobs, indicating a cooling labor market.
- 02Stable unemployment rate despite pressures from tariffs and AI adoption.
- 03Market anticipates potential adjustments to Fed's monetary policy in 2026.
Full Analysis
What the desk is arguing
The desk posits that the December jobs report signals a shift in the labor market that could prompt a reevaluation of U.S. monetary policy. Following a challenging year for employment metrics, the 50,000 jobs added in December reflect a more complex economic landscape, with the unemployment rate remaining stable but elevated.
Moreover, given that initial jobless claims were stable, there is cautious optimism about how these dynamics interplay with broader economic trends such as AI adoption and tariff effects. This nuanced view aligns with UBS’s assessment of labor market pressures and their implications for growth expectations.
Where it sits in our coverage
Our current consensus target for the USD is 1.075, with a range of 1.04 to 1.12 over the short term. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This desk’s view, currently leaning toward a stronger USD, reflects an outlook that could find support in positioning shifts from jpmorgan, while diverging from the more cautious stance of bofa.
How other firms see it
Several aligned firms, including jpmorgan, are signaling cautious optimism regarding U.S. economic strength, supporting the notion of a tightening labor market. In contrast, bofa's forecasts indicate skepticism about sustained recovery, suggesting a potential for downward pressure on the USD.
With labor metrics under key scrutiny, tracking EUR/USD could provide insight into sentiment shifts, especially as the European Central Bank grapples with its policy decisions in light of U.S. developments. A similar relationship is expected between USD and inflation indicators ahead of the next Fed meeting.
Market Implications
Traders should monitor USD levels around 1.075, as any deviations could signal a shift in sentiment. Additionally, pay attention to economic indicators that may precede Fed policy announcements, especially employment numbers and inflation data.
From the original
Fresh off the release of the December employment numbers, Paul drops by to reflect on the data and health checks the U.S. labor market. Plus, a look at growth expectations for the U.S. economy in 2026, and an outlook for monetary policy against the current macro backdrop. Feature
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Top of the Morning: The week in review and preview
The latest jobs data from the US labor market presents a mixed picture that is likely to influence Federal Reserve policy in the near term. Per the full note from UBS, nonfarm payrolls increased by 139,000, exceeding expectations but accompanied by substantial downward revisions of 95,000 for the previous two months. This subtle deceleration indicates the Fed may hold off on any rate cuts as we head towards the mid-year, especially given expectations for slower payroll growth driven by tariff impacts later this year.