US jobs report is the highlight of the week - BBH

Research Team at BBH suggests that the highlight of the week is the US jobs report and the consensus is for about the same as November or 178k.  

Key Quotes

“We see scope for disappointment.  Over the last ten years, December has seen less job growth than November in seven times and for the last three years in a row.  This is not sufficient to refute the null hypothesis, but it may make one cautious.  Moreover, the US economy appears to have slowed down considerably after that heady 3.5% pace reported in Q3.  The NY Fed has the economy tracking 1.8% in Q4.  The Atlanta Fed's tracker is likely to fall from the 2.5% pace seen on December 22 as subsequent data, including the preliminary merchandise trade figures in November.”

“Many economists anticipate that the unemployment rate will tick up to 4.7% from 4.6%.  Recall that the unemployment rate had fallen sharply from 4.9% in October.  The underemployment rate fell from 9.5% to 9.3%, its lowest level since the spring of 2008.  The work week is important to track because of the output implications, given the size of the workforce.”

“However, barring a major surprise, the most important aspect of the report may be the average hourly earnings.  It was a disappointing when it fell by 0.1% in November.  The year-over-year pace may recover to the recent high seen in October of 2.8%.  In December 2015, it was 2.6%.  In December 2014 it was 1.7% and 2.0% in 2013.”

“Separately, the US reports December auto sales.  Sales remain elevated, and likely boosted by extra incentives.  However, sequentially improvement is proving difficult around 17.8-18.0 mln annualized pace.  We note that apparently due to inventory accumulation, GM has temporarily closed production at a few factories.”

“We trace the big portfolio adjustment to the beginning of Q4 but recognize it having been accelerated by the US election results.  There is a range of opinions held on trade and economic issues in the incoming administration.  It is not immediately clear which voices win and the priorities. Another dimension to the unknown is the administration's relationship with Congress.  The visibility on these issues is unlikely to improve much over the next couple of weeks.  The flash point in the days ahead will be the president-elect's response to the President Obama's sanctions on Russia hacking.  Many in Congress do not think Obama were sufficient, while Trump appears to be pulling in the opposite direction.”

“On a nominal trade-weighted basis, the US dollar appreciated by almost 2% in December for a 4.6% advance in Q4.  The last time this Fed measure of the dollar rose for three consecutive months was November 2015-January 2016, when it rose 4.5%.  Investors will be sensitive to how Fed officials talk about it in the weeks ahead.”