December jobs: RSM's Brusuelas expects 135K jobs to be added

164,000 private payroll jobs were added in the month of December, according to ADP data, while only 130,000 were initially expected. The labor market appears to remain resilient ahead of Friday's nonfarm jobs data, which hopes to add up to 168,000 jobs.

"Tomorrow, I expect [135,000]. Now, that's below the consensus of [170,000], but that has to do with the difficult seasonal adjustments around retail, warehousing, and transportation," RSM Chief Economist Joe Brusuelas tells Yahoo Finance. "Normally, say 10 or 20 years ago, you would see a big jump in December on those — not so much this year."

Brusuelas goes on to comment on the Federal Reserve's potential sentiments on tomorrow's jobs data results.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

MADISON MILLS: So the big question, of course, is the labor market still too hot? Joining us now, Joe Brusuelas, RSM chief economist. And Joe, great to have you on. I'm just curious how does the market continue to price in six cuts after this data this morning.

JOE BRUSUELAS: The market's going to pull back. It's a little bit over its skis. The bond market's overbought right now. So rates, the long end is going to go up. Look, when you take a look at this morning's data, you mentioned resilient. I like that word, right, because my theme for last year was resilience, not recession.

OK. So what are we seeing here? A labor market that's broadly cooling the acyclical sectors, what you want to see, meds and EDs, health care, education, social assistance, we see hiring there as the market pivots. And the economy pivots to a little bit of a slower pace of growth in the first half of this year. I liked what I saw. You mentioned the wage growth, right?

So let's say that's your metric, 5.4% on a nominal basis. Once you back out inflation, let's say, 3% what's that tell you? You get 2.4% increase in real wages. That's what's going to continue to propel this economy, even as some areas continue to have some problems. Obviously, manufacturing hasn't quite gotten out of it although we know because we can see all those factories that are being built that's going to be a second half story. And, of course, the problems in real estate right now, right?

But nevertheless, the consumer is hanging in there in a very solid fashion. And hiring is just going to continue to do better. Tomorrow, I expect 135. Now that's below the consensus of 170. But as that has to do with the difficult seasonal adjustments around retail, warehousing, and transportation. Normally, say 10 or 20 years ago, you would have seen a big jump in December on those. Not so much this year.

SEANA SMITH: So Joe, how do you think the Fed is potentially-- not so much that they're examining this number. But if they look ahead to tomorrow, if we do see 135, like you're expecting, even if we do see 170, which seems to be consensus right now on the Street. Is that still a bit too hot, given the fact that last leg, the last mile here in this fight against inflation could prove to be much stickier or much trickier than maybe we had initially anticipated?

JOE BRUSUELAS: So if you're a central banker, you're looking at, well, if they get anywhere between 135 and 170, you're going to end up with 2.7 million jobs created last year. Big smile on the Fed's face. Second, they do think that disinflation is moving through the economy at a slow pace that will create a condition for a decline in the federal funds policy rate. Simply because at 5.5 on the upper boundary, it's too restrictive for an economy that's likely to move back towards a 2% trend growth rate this year.