The stock markets seem to be on an eerie pause before the November elections. The jobs reports have been falling short of estimates and casting shadows on the case for a rate hike later this year. During September, the economy added 156,000 job while economists had been looking for an increase of 168,000. The six month average, furthermore, slowed to 169,000, the weakest since November 2012. This was the 72nd month of positive job creation in the U.S., but the pace has slowed. From near 250,000 at the end of last year, the trend in job creation has subsided to around 200,000 in the early months of 2016 before falling below 170,000 as of late. Continued improvement in the labor market was at the forefront of the Fed’s latest talking points, suggesting the possibility of a year-end rate hike. Any further loss of momentum in hiring at this point, not to mention weaker-than-expected topline growth as we await the Q3 GDP, or a further decline in inflation, will make it more difficult for the Committee to adjust policy anytime soon.
The Brexit vote is now haunting the British Pound. As of now, the British currency has lost 17 percent versus the dollar this year and is now pegged at 1.23 dollars per pound. The pound is at the bottom of the 16 major peers this year. Many economists, however, believe that this is a good thing. Despite the shock of Brexit, there are few tangible signs of economic distress in Britain as the stocks and bond markets are strong. The employment situation and consumer spending are also steady. Economists believe that the decline of the British pound has acted as a giant shock absorber on the road to Brexit. Britain may be able to boost tourism and also exports, although at a higher tariff, to Europe.
After a damp employment report last Friday, this week is quieter in terms of data releases as the market is still digesting the jobs report. The market moving indicators this week include the FOMC minutes on Wednesday, Jobless Claims on Thursday and Retail Sales and Consumer Sentiments on Friday.
*Update provide by NYCB Bank