U.S. Jobs Report to Set the Tone for 2025 Market Outlook

The stock market faces its first major test of the year with the U.S. jobs report, which will offer crucial insight into the health of the economy and potentially set the direction for equity markets in 2025. After a strong performance in 2024, with the benchmark S&P 500 rising 23%, investors are looking to the labor market data to determine if the economy remains on track for continued growth or if signs of weakness could spark volatility.
Stocks experienced a cooling period at the end of December and start of January, following a period of strong gains. The upcoming jobs report, set for release on January 10, is expected to show growth of 150,000 jobs and an unemployment rate of 4.2%, according to a Reuters poll of economists. This report is seen as the first clear indicator of the underlying trend in the labor market, following volatile data influenced by events such as aerospace industry strikes and hurricanes.
Anthony Saglimbene, chief market strategist at Ameriprise Financial, notes that investors are looking for confirmation that labor market trends remain solid, which would suggest a firm economic outlook. “If data suggests things are weakening a bit more than expected, it could create volatility,” Saglimbene said, highlighting the sensitive nature of the market’s reaction to the jobs report.
The Federal Reserve’s interest rate decisions will also be influenced by the data. After reducing its projected rate cuts for 2025, the Fed’s stance has added uncertainty to the market. Following three consecutive rate cuts, the Fed is expected to pause its easing cycle in January before making additional cuts later in the year. However, a report showing an overly strong economy could revive inflation fears, leading to further tightening by the Fed.
Despite the strong performance of stocks in 2024, December was a weaker month, with the S&P 500 falling 2.5%. The index saw only five days in December where more stocks advanced than declined, the lowest proportion of positive days in any month since 1990, according to Bespoke Investment Group.
Looking ahead, Art Hogan, chief market strategist at B. Riley Wealth, expects the return of more robust trading volumes in the coming week to provide clearer direction for the market. “A solid jobs report would certainly help turn things around in a market that has been soft to start the new year,” Hogan said.
In addition to the jobs report, other employment data, factory orders, and services sector reports will be closely watched, adding to the market’s sensitivity in the coming days. As investors await the release of these key figures, the job market will remain a central focus in determining the market’s trajectory for 2025.