U.S. December Jobs Report Due Out Today; St. Louis Fed Names Musalem Its New President By James Christie
Good day. The U.S. Labor Department will release its all-important December jobs report today, with economists expecting a drop in the addition to payrolls and a tick up in the unemployment rate from November. The labor market's slowing but steady pace in 2023, coupled with a sharp slowdown in inflation, has cemented confidence that the U.S. economy can achieve the soft landing much desired by the Federal Reserve. Meanwhile, the St. Louis Fed said it named Alberto Musalem as its next president and chief executive. Most recently, Musalem has served as chief executive of Evince Asset Management, a quantitative investment technology company he co-founded in 2018. He was also an executive vice president and senior adviser at the New York Fed from 2014 to 2017, leading divisions on policy analysis and international affairs.
Now on to today's news and analysis.
Top News Slower Hiring Adds to Case for Soft Landing
The December employment report will show the labor market continued to cool but still added jobs at a solid pace as unemployment remained low, analysts estimate.
Employers added 170,000 jobs in December, according to economists surveyed by The Wall Street Journal. That would be a pullback from November's gain of 199,000 jobs, which was aided by the return of auto workers who had been on strike. The annual jobs gain is set to slow for the second straight year in 2023, though it remained above prepandemic levels.
Economist Alberto Musalem Named Next President of St. Louis Fed
Alberto Musalem, an economist and former senior adviser at the New York Fed, will become the next president and CEO of the St. Louis Fed . He will be a voting member on the Fed's interest-rate-setting committee next year.
Mexican Central Bankers in No Hurry to Cut Rates, Minutes Show
Mexican central bankers warned against rushing into interest-rate cuts in the New Year as they wrapped up 2023 with a sixth consecutive meeting on hold, minutes of their December meeting showed Thursday.
Pro Take: Fed Losses, or 'Deferred Assets,' Rise, Along With Potential for Political Backlash By Bob Fernandez
The Federal Reserve considered the optics and politics of sustained financial losses before they became a reality in September 2022, even developing a term for them-"deferred assets."
Through late 2022 and 2023, the Fed's interest-rate hikes have produced about $130 billion in losses for the central bank as it pays out more in interest on its liabilities, mostly bank reserves, than it earns on its balance sheet swollen with pandemic-related asset purchases. Read more .
U.S. Economy Americans' Required Retirement Income Has Never Been Higher
A surging stock market pushed many retirement account balances to new highs in the waning days of 2023. But for those already spending their retirement nest eggs, these higher balances are a mixed blessing .
U.S. Crude Oil Stocks Fell 5.5 Million Barrels in Week Ended Dec. 29
U.S. crude oil inventories fell more than expected last week , while stocks of gasoline and distillate fuels saw large increases pointing to sluggish demand for products, according to the U.S. Energy Information Administration.
Warehouse Availability Surges to Highest Level Since the Pandemic
The average warehouse vacancy rate jumped to 5.2% in the fourth quarter of 2023 from 4.6% the previous quarter and 3.1% a year earlier, according to a new report from commercial real-estate services firm Cushman & Wakefield.
Avian Influenza Is Expected to Push Egg Prices Higher
An avian influenza outbreak, which has led to the death of about 80 million birds since it began in 2022, is expected to tighten the supply of egg-laying hens in the U.S. and raise wholesale prices, analysts say.
Key Developments Around the World The 'CEO' of Hamas Who Found the Money to Attack Israel
When Zaher Jabarin ran a Hamas cell, he borrowed cash from his mother to buy weapons. Now, he runs a financial empire estimated to be worth hundreds of millions of dollars and funds Hamas's operations against Israel.
India Wanted a Manufacturing Boom But Workers Are Back on Farms
The ranks of India's farmworkers have swelled by some 60 million over the past four years, a shift fueled in part by a food-welfare program. Meanwhile, jobs in manufacturing nationwide haven't budged.
China Launches Antidumping Probe Into Brandy Imported From EU
China has launched an antidumping investigation into brandy imported from the European Union, escalating trade tensions after the EU's antisubsidy probe into China's electric-vehicle makers.
Financial Regulation Roundup Top Bank Regulator Takes on 'Drive Fast, Crash' Risk Culture
Acting Comptroller of the Currency Michael Hsu-one of the nation's top banking regulators and a leading voice on risk and on banks being "too big to manage"-gives his take on the past year and the challenges looming for the industry.
Prosecutors Pursue Affinity-Fraud Cases
Law-enforcement officials in the U.S. are making a push to focus on financial scams called affinity frauds that target close-knit communities , often built on bonds of ethnicity, nationality or religion.
Chinese Financial Conglomerate Zhongzhi Declares Bankruptcy
China's Zhongzhi Enterprise Group has declared bankruptcy , following a calamitous year in which it sparked fears that the Chinese economy was facing a "Lehman moment." It is one of China's biggest corporate failures in recent history.
Forward Guidance Friday (all times ET)
8:30 a.m.: U.S. employment report for December; Canada labor force survey for December
10 a.m.: U.S. factory orders for November; ISM Non-Manufacturing PMI for U.S. for December
Monday
5 a.m.: EU business and consumer surveys for December
10 a.m.: The Conference Board Employment Trends Index for December
11 a.m.: New York Fed Survey of Consumer Expectations
Research Germany's Easing Core Inflation Supports ECB Rate-Cut Expectations
The trend in German core inflation, which dipped to 3.5% in December from 3.8% the prior month, should be enough to maintain expectations that the European Central Bank will begin cutting rates in coming months, Capital Economics chief Europe economist Andrew Kenningham writes in a note. Core inflation will probably decline further in February and March as last year's large monthly increases drop out of the annual rate, even if headline inflation ticks up in January on the back of new taxes introduced at the start of 2024, he says. The ECB will most likely begin cutting interest rates in or around April, with the deposit rate falling from 4.0% to 2.75% by the end of the year, he adds.
-Ed Frankl
Bank of Canada Should Reconsider QT Plans
The Bank of Canada may need to scale back its quantitative-tightening plans, Bank of Nova Scotia economist Derek Holt says, after the central bank injected some liquidity in financial markets through an overnight-repo operation. Holt notes the cost of overnight collateral funding in Canada has stayed above the BOC's policy rate for four months now. This may be a sign that the BOC is "withdrawing liquidity and funding support at an overly rapid pace," Holt says. Total assets on the BOC's balance sheet have dropped over 40% since peaking in the first quarter of 2021, when the central bank was engaged in QE. The BOC forecast last year quantitative tightening could end either in the fourth quarter of 2024 or the first half of 2025.
-Paul Vieira
Reserve Bank of Australia May Ease Rates Sooner Than Expected
Although the analyst consensus expects the Reserve Bank of Australia to cut rates only in September, Capital Economics says it is sticking with its view that the RBA will loosen policy as early as May. For one thing, the household cash-flow channel of monetary policy is stronger in Australia than elsewhere because of the high level of floating-rate mortgages. So while the RBA hasn't tightened as aggressively as some of its counterparts, rate hikes are already strongly impinging on domestic demand, says Abhijit Surya, economist at Capital Economics. With new PMI data pointing to a plunge in goods inflation, expect consumer-price inflation to approach the RBA's 2%-3% target sooner than most anticipate, he adds.
-James Glynn
Commentary How the 2023 Bank Crisis Can Still Be Felt in 2024
Lower interest rates will be welcome news to many in the financial system, but the aftereffects of last year's strains mean the system's response to loosening will be far from straightforward, Telis Demos writes.
The Future Is Bright if You Know Where to Look
While "techno-optimism" hasn't been vindicated in a while and history militates against the innovations of the past few years making that much difference, something feels different , Greg Ip writes.
Markets Moving in Lockstep Threaten to Make for a Trying 2024
The year started the way the last one ended, with all the focus on the Fed and inflation. The first three trading days of 2024 showed three ways that inflation and the economy can affect your portfolio, James Mackintosh writes.
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01-05-24 0715ET
