The Daily Update - Non-farm Payrolls

Today’s October non-farm payroll release showed 250,000 jobs added which was above expectations of 200,000 jobs created, although the previous month’s figure was revised down by 16,000 to 118,000 from 134,000. The unemployment rate held at 3.7% and the participation rate rose marginally to 62.9% from 62.7%. But the standout news is the 3.1% yoy surge in average hourly earnings, which is the largest annual jump in pay since 2009 (when it was as high as 3.6% just before slumping to under 2% for most of the next three years). The large rise in wages was in line with forecasts, which had expected October’s figure to beat the previous month’s year-on-year rise of 2.8%.

At the time of writing, Treasuries were trading a little weaker in response to the forecast beating data numbers and seem to have steadied in the range of 3.17-3.18%. They had already conceded some ground earlier this morning as 10-year Treasury yields rose from 3.14% to 3.17% along with equities bouncing on Trump’s comments that trade talks “went well” and the accompanying speculation of a US-China breakthrough. At the time of writing, the S&P 500 has already given-up all of today’s earlier gains which adds to the narrative that markets have seen stronger reactions to negative news over positive news in recent weeks when there has been plenty of both. It’s worth noting that the two month average headline on NFP is 184k which is below the market calls for both months.

Trump has been cashing in on this positive economic news just ahead of the midterms on Tuesday with little subtlety. His latest tweet, “Wow! The U.S. added 250,000 Jobs in October - and this was despite the hurricanes. Unemployment at 3.7%. Wages UP! These are incredible numbers. Keep it going, Vote Republican!” Following “despite the hurricanes” one could add “protectionist trade policies” which surely have, and will increasingly translate to strain on employment and wage figures. This reminder of next week’s elections is also a reminder of the accompanying uncertainties for the years ahead as more of the effects of recent Republican trade policies become clear we see how part two of Trump’s plan to “Make America Great Again” unfolds.

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