Last week ended with the publication of disappointing NFP jobs numbers from the USA; coming in at 148k, versus expectations of circa 190k. A peculiar number suggesting that retailers, working on ever tightening margins, laid off employees earlier than expected during the Xmas season. The unemployment rate remained unchanged at 4.1%, whilst the underemployment rate, which some analysts cite as the more relevant and true reflection of the USA unemployment situation, crept up to 8.1%. Another metric which rose, which appears to be dismissed as irrelevant despite it being classed as “hard data”, was the balance of trade deficit; coming in at -$50.5 per month for November, projecting a circa -$600b yearly deficit.
Jobs data published on Thursday for the USA painted an optimistic backdrop to the encouraging manufacturing figures published on Wednesday, weekly jobless claims were down, as are continuous claims. The ADP numbers, the precursor to the NFP number, came in above the forecast of 190k, at 250k. Challenger job cuts came in at a stunning level, at -3.6% and circa 36k for December, it’s the lowest print since 1990. Traders (and the machines) also had time to analyse the latest minutes from the FOMC/Fed monetary policy meeting held in December.
The ISM manufacturing index for the USA came in at 59.7 for December, construction spending rose by 0.8% in November to a record annual high, whilst new orders recorded a 69.4 reading for December. This positive news extended beyond impacting equity values, the news also caused the U.S. dollar to rise versus its three main peers; yen, euro and sterling. On Wednesday evening The Fed released the minutes from their December FOMC rate setting meeting and the release contained few surprises. The committee voiced their concerns on inflation being below the 2% target, whilst suggesting that the tax cuts, which will cut the corporate tax rate from 35% to 21%, may have a healthy trickle down effect on consumers’ spending ability, thereby increasing inflation.