NFP: Trump will not be happy with the numbers if stocks fall

  • The US employment report beat expectations on jobs and participation.
  • President Trump can celebrate the low unemployment rate again.
  • However, further Fed hikes may push stocks lower.

The US Non-Farm Payrolls report for November beat expectations with a gain of 250,000 positions, well above averages of under 200,000 and early expectations. Net revisions were flat.

Another piece of good news came from the participation rate. While the unemployment rate remained unchanged at 3.7%, participation moved up from 62.7% to 62.9%.

The jobless rate remains at the highest levels since the 1960s, and Trump can indeed celebrate.

The third piece of good news was not a surprise but represents a significant milestone. Wages rose by 0.2% MoM and 3.1% YoY, precisely as expected. Nevertheless, the acceleration above 3% is substantial and is the fastest wage growth since 2009.

Higher wage growth is projected to translate to higher inflation. Higher inflation means higher interest rates by the hawkish Fed. And with higher interest rates, stocks become less attractive. The central bank is expected to hike rates in December and the chances are now higher. They have forecast three additional rate increases in 2019.

The US President follows equity markets very carefully, especially the Dow Jones Industrial Average. He praises himself for gains and blames the Fed for falls.

The President’s reaction to the data is critical as Americans go to the polls in four days. Democrats are expected to win the House while Republicans are set to retain the Senate. A split government can weigh on the US Dollar

If stocks remain stable on the eve of the vote, Trump can celebrate the low unemployment rate. But if rate hike expectations rise and equities drop, it will sour his response.

More: What the US mid-term elections mean for currencies: everything you need to know

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