STOP PRESS : Employment data keeps Trump Trades alive and well ......

STOP PRESS : Employment data keeps Trump Trades alive and well ......

If political events and the implications of Donald Trump's election have rather overshadowed the last two releases of the monthly US Employment data, it's fair to say that the December numbers just released had everybody's attention. In part that's because investors were so keen to see how well the data chimed with Wednesday's release of the minutes of December's Fed meeting : will the Fed come over extra hawkish if the labour market gets overtight , or will the converse happen ? Also the growing suspicion that Mr Trump's policies may not be able to produce the levels of growth (and inflation) that are his target, and the resulting 2-day reverse of the so-called Trump trades (short bonds and long dollar) , was making markets a touch nervous.

In the event Dec Non-Farm Payrolls increased 156,000, which may not look over-spectacular against a consensus estimate of +175,000 but was more than covered by November's figure being revised upward by 26,000. The headline unemployment rate did tick up to 4.7% (from 4.6%), but this number has been pretty erratic of late. Probably the rise in monthly average hourly earnings by 0.4% (due +0.3), and by 2.9% year-on-year, caught the most attention and has been taken to show that the big growth and inflation story is alive and well. It's only minutes rather than hours after the release but the dollar's a little firmer and bonds a little lower (and yields higher).

Fair enough ..... although some will no doubt advance the argument that since Mr Trump has not even taken office yet, and his policies will take time to put into effect, it's awful early to start searching for bullish elements among the data as further evidence that the "Trump Trades" will inevitably continue to prosper. They may or may not be right, but the recent pullback does also hint at a vulnerability that suggests that the action will not always be one-way.