Hurricane season still stubbornly clouding data

While adding 261,000 jobs over the course October is no mean feat, it still fell slightly short of expectations. This, twinned with slower than expected wage growth, has tilted today’s labor market report towards being a disappointment. However, the revisions to both September and August’s figures were positive, meaning there was fall in job openings in September as was previously feared.

Nonetheless, the data was noisy. The far-reaching effects of the early September hurricane season continued to add to the volatility of today’s figure, making the interpretation and analysis of the current condition of the labor market even trickier. As a result, the market’s taken the release in its stride, with the dollar relatively unmoved against the euro and sterling post-payrolls.

North of the border, the Loonie’s bouncing back after a tough few sessions as Canada added over twice as many jobs as economists had forecast, with a +35,000 change to net employment. USD/CAD’s now well below 1.28 for the first time in over a week.

Tax plan launched, Powell announced

Finally, the Republican tax plan was unveiled yesterday with the full backing of the Trump White House. While the President may be in favour, it has to be voted on by both the House and the Senate and certain provisions within the plan make it fairly certain that the bill as it looks now will not be the bill that is eventually signed into law.

Subsidies to the energy and pharmaceutical sector are set to be cut and retail industry members are likely to be unhappy with changes to international tax as they were to the ill-fated border adjustment tax issue floated earlier this year. Economists much closer to the issue than myself also believe that somewhere north of $3 trillion of spending cuts will be needed to make sure the deficit doesn’t explode due to the cut to government income.

Of course, one of the reasons why Trump the candidate was so popular was his pledge to ‘drain the swamp’ and put the power back into the hands of the people. Should his tax plan fall to lobby groups bent on securing tax breaks for their representative industry there is no doubt that Trump will see this as an opportunity to roll out some campaign language and secure his grip on the base once again.

The dollar’s role in all of this is unclear at the moment but little movement came from the announcement of Jerome Powell as the new Federal Reserve Chair. We expect his nomination to pass without a hitch.

The day ahead

Rounding off the week, there’s little on the calendar to excite markets. As such, focus will remain on tweaks, trials and tribulations of the tax bill.

Have a great day.