How Friday's Jobs Report Could Reset Fed and Market Expectations
All eyes will be on 8:30 AM as non-farm payrolls could be a near-term signal. Let's revisit recent data and game out potential scenarios.
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Stocks are mixed as we move past Thursday morning’s trading session, and volumes are quite low compared to their typical levels. With less than three hours to go, volume for the Nasdaq 100 is a fraction of the average 9 billion, and we’re seeing much lower volumes in holdings such as Broadcom (AVGO) , Axon Enterprise (AXON) , ServiceNow (NOW) , Marvell Technology (MRVL) , Qualcomm (QCOM) , and many others. Odds are folks are taking a wait-and-see approach ahead of Friday’s December Employment Report and the start of December-quarter earnings season next week.
On Tuesday, we gamed out the outcomes of the December ADP Employment Change report, and as we saw, it came up short relative to what was expected. However, the December Service PMI data from ISM surprised to the upside in the key categories of employment and new orders. With employment, the sub-index bounced back to 52.0, marking its first move above the expansion-contraction line since May’s 50.7 reading. That 52.0 reading for December was the third highest of the year and the highest since February.
To that, we can add the findings of Thursday’s Challenger Report, which showed a sharp drop in the number of cuts, down more than 50% in December to 35,553, compared to November’s 71,321 figure. Challenger also found that employers announced the highest level of December hiring plans since 2022. Granted, the December 2025 hiring plan of 10,496 is a relatively small figure, but paired with the December ISM Service PMI’s employment findings, it suggests we could see a stronger jobs reports for December Friday morning, compared to the 60,000 jobs the market expects.
Here’s the thing, though, even if Friday's nonfarm payroll number were to come in near 105,000, subject to the revised figures for October and November, the three-month moving average would still only be on par with that for November. In other words, nearly 22,000 jobs, which is still a low level of job creation, but not necessarily enough to spur the Fed into more action near term after delivering three 25-basis point rate cuts at its last three policy meetings.
If we do see a much weaker figure, like one near 35,000 jobs, and subject to October and November revisions, that would put the trailing three-month non-farm payroll figure in negative territory — and be the second such figure of three in Q4 2025. That would not go unnoticed by the Fed or the market, and would likely resonate as bad news for the economy, which is "good news" when it comes to the Fed.
Beyond headline payrolls, we will also be closely watching the unemployment rate. If it holds at 4.6% for a second consecutive month, it could reignite expectations for more than one rate cut this year — though still well short of the 150 basis points some policymakers have floated.
We’ll know much more after 8:30 AM ET Friday.
