Nonfarm Payrolls December 2017

At 7:30 AM CDT, the Bureau of Labor Statistics released its most recent assessment of the US job market. The crux of the report is as follows: 148,000 jobs were added in the final month of 2017. The vast majority of gains can be attributed to the private sector with 146,000 of the 148,000 total. Both unemployment and labor participation rates held at 4.1% and 62.7% respectively. Interestingly, the biggest contributor to December jobs was the construction sector with 30,000 jobs added, while retail lagged with ~20,000 jobs lost during the Holiday period. The average hourly workweek was unchanged from November at 34.5 and there was an uptick in wages. US workers earned $26.63/ hour last month, representing a 0.3% month over month increase or an increase of ~2.5% compared to this time last year.

It is another solid yet uninspiring report for the labor market with marginally weak headline figures offset by slightly firmer wage growth. The indication seems to be that the US economy remains on solid footing, but we are a good distance from the torrid expansion that was championed in the aftermath of the 2016 election. Markets seem to agree. The US dollar softened a bit on the report’s release, after having been firmer overnight, and treasuries shrugged. Our eyes are squarely fixed on the Fed and the ECB. European fundamentals have been improving and any change in policy could have meaningful ramifications in the currency complex.

Our strategic outlook remains the same as we embark on our 2018 market excursion- neutral US dollar, neutral rates, and bullish equities. We hope your year is off to a great start. Happy New Year!     

Market Outlook: Neutral USD, Neutral Rates, Bullish Equities